Britain's factory index fell to a four-month low in July while output growth ran at its fastest in almost two years, and the release names what pulled the number down

Money & World

The Editorial Team · August 3, 2026

Photo: Wijs (Wise) / Pexels

What it changes

If you read this index as a single number, July looks like the month Britain's factory recovery began to tire. The components say something narrower and more useful. Production and new orders both accelerated, and the fall in the headline came mostly from three places: manufacturers running down stocks of inputs, hiring almost stopping, and suppliers delivering faster than before. The third of those is the one worth understanding, because it is an improvement that the index is built to score as a deterioration. A purchasing managers index asks whether supplier delivery times got longer, on the reasoning that vendors slow down when demand is strong, and a longer lead time therefore adds to the headline. Lead times did lengthen again in July, for the thirty-first month in a row, but by the least since February. Easing supply chains subtract from the number. If you supply British manufacturers, the price line is the one that has actually moved. Input cost inflation is at a five-month low and selling price inflation at a four-month low, both still running above their long-run survey averages, with chemicals, electrical and electronic products, food, metals and packaging all reported dearer. If you are watching for hiring, the survey gives one forward signal and it is thin: backlogs of work rose for the first time since April 2022, which is what usually precedes recruitment, against staffing growth that has already slowed to near stagnation and optimism at a three-month low. The survey period closed on 28 July, so nothing in it reflects anything that has happened since.

Fifty-one point nine. That is the July reading of the S&P Global UK Manufacturing PMI, down from 52.5 in June and the lowest in four months.

Most of what sits underneath it went the other way. Manufacturing output rose for a fourth month running, at the fastest rate in almost two years, and total new orders rose for an eighth consecutive month. New export business rose for a seventh, with the release naming order growth from North America, the European Union, mainland China, India and South Korea. The index has now held above the neutral 50.0 mark for nine months.

The release says plainly where the fall came from. Four of the five components of the headline index were at levels consistent with improving conditions. What dragged it down was a steep reduction in stocks of purchases, slower jobs growth, and a sharp easing in the rate at which supplier delivery times lengthened.

That last one repays a moment. Lead times still lengthened in July, for the thirty-first successive month, but at the weakest rate since February. A purchasing managers index scores longer delivery times as a positive contribution. So a supply chain that is unclogging pushes the headline down while it is happening.

Prices, backlogs and hiring

Input cost inflation eased to a five-month low and selling price inflation to a four-month low. Both remain above their respective survey averages. Manufacturers reported a lessening of supply chain tensions and a drop in demand for inputs, though a broad range of purchases were still dearer, among them chemicals, electrical and electronic products, food, metals and packaging.

Backlogs of work edged higher for the first time since April 2022.

Hiring nearly stopped. Staffing levels rose for a fourth successive month, but the rate eased to near stagnation and was the weakest of the current upturn, with some firms concentrating on cost control and capacity reduction while others stepped up recruitment to meet higher production. Business optimism slipped to a three-month low, and the release attributes the caution to global trade tensions, tax rises and regulatory change.

Rob Dobson, Director at S&P Global Market Intelligence, said in the release that supply chain delays eased to "their lowest since the outbreak of the war in the Middle East", and that developments there "will be key to supply and price developments in the coming weeks".

Purchasing activity fell for the first time since March, and stocks of both inputs and finished goods declined for a second month. Responses were collected between 9 and 28 July.

Britain's factory index fell to a four-month low in July while output growth ran at its fastest in almost two years, and the release names what pulled the number down

Prices, backlogs and hiring

Euro area factory output rose at its fastest rate in more than four years, and the survey says producers got there by working through orders placed in earlier months

Middle Eastern crude was more than 90 percent of Japan's oil imports before the war, and the Bank of Japan has now published the vessel tracking that shows what replaced it

Japanese factory output rose in July at the fastest rate since February 2014, and one of the things lifting the number is firms buying ahead of the war