By Daniel Hunter

Conditions in the UK manufacturing sector remained fragile in June. Although output volumes recouped some of the losses incurred in the previous month, demand remained weak and job losses continued.

On a slightly brighter note, cost pressures fell sharply, with average input prices declining at the fastest pace since May 2009.

At 48.6 in June, up from May’s three-year low of 45.9, the seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) remained below the neutral 50.0 mark for the second consecutive month. Over Q2 2012 as a whole, the average PMI reading (48.2) was the weakest since Q2 2009.

June saw manufacturing production rise for the sixth time in the past seven months, but only following a solid contraction during May. The underlying outlook remained subdued overall, as companies reported that output volumes had been underpinned by a marked reduction in backlogs of work. In contrast, new order intakes fell further.

“The manufacturing sector is playing catch up after the dramatic falls in activity reflected in last month’s PMI," said David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply.

"The effects of the Eurozone crisis and global economic slowdown are making it a tricky time to build on exports, but there were a couple of brighter spots which helped ease the decline.

“The significant reduction of input prices was a silver lining for the sector, as businesses tried to claw back some of the margins lost in previous months. Businesses have also responded to weak levels of new orders by working through backlogs of work, leading to an overall growth in output.

“The concern for the near future is the spare capacity reported by manufacturers, which could lead to job losses in the coming months unless there is a pick-up in orders. As ever, it remains a long and difficult road ahead.”

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