The start of the third quarter saw the UK manufacturing downturn show signs of easing. The rate of contraction in output slowed to its weakest in the current sequence of decline and business optimism rose to a five-month high.

There remained risks to the downside, however, including persistently weak domestic and overseas market conditions, subdued client sentiment and manufacturers concerns about the ongoing implications of government budget decisions.

Manufacturing production contracted for the ninth month running. However, after easing in each of the past four months, the rate of decline was only mild and the weakest during the current downturn.

Market conditions remained subdued in July. The overall level of incoming new business fell for the tenth straight month and at a quicker pace than in the prior survey month.

New export orders have now decreased throughout the past three-and-a-half years, with the latest decline reflecting global tariff uncertainties, ongoing administrative issues postBrexit and rising competition.

The combination of weak demand, rising staff costs and subdued market confidence led to a further cut to employment during July. Job losses were registered for the ninth month in a row.

The latest survey data also suggested that the current sequence of declining staff headcounts may have further to run. Backlogs of work continued to fall despite recent cuts to capacity, with work-in-hand (but not yet completed) volumes falling at a marked pace.

Business optimism improved to a five-month high in July, attributed to hopes for a market recovery, new product launches and operational improvements.

Rates of input cost and selling price inflation remained relatively stable in July. There were reports of higher transportation, shipping and supplier costs adding to purchase prices.

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