UK and Chinese manufacturing improves, Europe weakens a little

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Demand for recycled materials from manufacturers looks set to remain relatively stable, if current manufacturing conditions continue.

In the UK, the manufacturing outlook improved slightly in May, with the IHS Markit/CIPS purchasing managers’ index (PMI) registering 54.4 up from 53.9 in April. This means UK manufacturing has now been growing for the 22nd consecutive month.

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However, there are concerns for UK manufacturers with stores of finished goods increasing and a sharp reduction in backlogs of work. This in fact could mean less demand for raw materials from UK manufacturers if they cut back on production.

While the growth of new business remained solid in May, it did represent an 11-month low in terms of growth rate. In particular, demand from the UK itself slowed, even if there was a slight improvement in overseas demand.

UK manufacturers also reported increasing cost of raw materials in May, with shortages also causing prices to rise. This was the first time that raw material prices accelerated in the UK since January.

China also saw an improvement in its manufacturing performance, with its official PMI reaching 51.9 in May from 51.4 in April. While an improvement, Chinese manufacturing performance still remains weak compared to other regions.

However, its new orders sub-index was at 53.8, suggesting the increase in demand for Chinese manufactured goods look set to continue.

The main raw material sub-index improved by 0.1 to 49.6 in May. This appears to show that while demand for raw materials continues to fall, this pattern is weakening and it could be soon that demand actually starts to increase. This will be indicated if the sub-index starts to rise above 50.

Growth in eurozone manufacturing slowed in May to a still very strong 55.5 from 56.2 in April, according to the IHS Markit Eurozone Manufacturing PMI.

Both output and new order growth slowed in eurozone economies. While manufacturers also noted that raw material costs were increasing sharply – for the first time since January. The individual country PMIs were:

Netherlands 60.3 8-month low
Austria        57.3 14-month low
Germany     56.9 15-month low
Ireland        55.4 3-month high
France         54.4 3-month high
Greece        54.2 2-month high
Spain          53.4 9-month low
Italy           52.7 18-month low

 

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