2014.10.0203:50:35UTC+00Activity levels for manufacturing in UK at lowest in 17 months

Manufacturers in the UK have reported the slowest increase in activity levels in 17 months during the month of September, indicating a cooldown in the sector’s growth.

Markit’s manufacturing purchasing managers’ index declined from the 52.2 in August to 51.6 in September, dropping steadily from the high of 57 in April.

The weaker than expected figures could be accounted for by disappointing performances in output growth and new orders which were not much higher than the long term average even as employment continued to be strong. Manufacturing currently makes up 10% of the British economy and is lagging behind other sectors by still being 4.5% below its peak prior to the financial crisis.

Markit’s Rob Dobson says that, “The strong upsurge in UK manufacturing sector at the start of the year appears to have run its course.” Companies that reported smaller improvements in production levels, new export orders, and new businesses on top of the negative effects of Scotland’s referendum in September added downward pressure to the overall index.

Analysts, however, believe that these results do not suggest that the UK’s economic surge is nearing an end. Consumer confidence remains high in the region and the intentions of firms to invest have not been damaged, fueling domestic demand that could boost manufacturing output during 2015, says Capital Economics’ Paul Hollingsworth.

Although the PMI itself and other data that indicate a recent slump in manufacturing is not enough to trouble policy makers from the Bank of England, should the weakness show signs of spreading into Britain’s dominant services sector, it could push the schedule of interest rate hikes further into next year.