Manufacturing PMI at three-month low

Posted on 14 Feb 2019 and read 537 times
Manufacturing PMI at three-month lowThe IHS Markit/CIPS UK Manufacturing PMI, which measures the performance of the manufacturing sector and is derived from a survey of 600 industrial companies, fell to a three-month low of 52.8 in January 2019 from 54.2 in December (and was therefore below market expectations of 53.5).

The latest reading was also the second-weakest since July 2016, the first survey month following the EU referendum
result (a reading above 50 indicates an expansion of the manufacturing sector compared to the previous month, below 50 represents a con-traction, while 50 indicates no change).

Output growth was the weakest registered during the past two-and-a-half years, and new-order inflows grew at a slower pace. Moreover, inventories of finished goods rose at the third-fastest rate in the survey’s history, employment fell for only the second time in the past two-and-a-half years, and Brexit preparations are reported to have led to the fastest increase in inventory holdings in the 27-year history of the survey.

On the price front, input cost inflation eased to a 32-month low, and average selling prices grew at a slower pace. Looking ahead, “positive sentiment” dipped to a 30-month low amid Brexit uncertainty and signs of a European economic slowdown.

Stephen Cooper, head of industrial manufacturing at KPMG in the UK (www.home.kpmg/uk/en/home/html), said: “The underlying data does not paint a rosy picture; and when taken with poor results from Europe, macro-economic issues and a downturn in activity in China, these factors suggest that a slip into recession for UK manufacturing is a distinct possibility.

With this and the continuing Brexit saga, we continue to encourage manufacturers to take positive steps to understand their supply chains, mitigate risks and ensure — to the best of their ability — that financing is available in case conditions deteriorate further.”

Francesco Arcangeli, economist at EEF (the manufacturers’ organisation), said: “Stockpiling activities are at 27-year high, with storage of inputs continuing to increase rapidly in preparation for a potential No Deal.

"At the same time, orders are slowing and employment is contracting.

"The EU manufacturing PMI is also ‘trending downwards’ and getting closer to the 50 contraction threshold.

"Germany moved to negative territory for the first time in more than four years, and Italy remained below 50 for the fourth month in a row. Italy has now officially entered technical recession, while Germany is teetering just above it.”

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