Downturn in UK manufacturing continues

Posted on 17 Oct 2019 and read 397 times
Downturn in UK manufacturing continuesThe ‘headline seasonally adjusted’ IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose slightly to 48.3 in September, up from August’s six-and-a-half year low of 47.4.

The headline index has now remained below the neutral 50.0 mark for five successive months — its longest sequence below that mark since mid-2009.

Manufacturing production continued to contract in September, as companies cut back their output in response to a further reduction in new order intakes.

The investment goods sector was by far the weakest performer, seeing the steepest drops in both output and new business.

This reflected — at least in part — a reluctance among clients to commit to capital expenditure due to on-going market uncertainties.

The consumer goods sector was the only category to see output rise in September, as production in the intermediate goods industry stagnated.

The outlook for both sectors remained lacklustre however, as intakes of new work decreased in both during September.

Companies reported lower inflows of new work from the domestic and overseas markets, with the trend in the former especially weak.

Although the rate of decline in new export business was much slower than in August, reports that Brexit uncertainty and clients routing supply chains away from the UK still impacted on foreign demand.

The on-going weakness exhibited by manufacturing filtered through to the labour market, with staffing levels reduced at the fastest pace since February 2013.

Companies reported that capacity had been reduced due to lower demand, efforts to control costs, redundancies and natural wastage.

Job losses were widespread across the sector, with declines seen across the consumer, intermediate and investment goods industries and at in and large producers.

September saw increased levels of input buying among manufacturers, with a number of firms reporting that purchasing had been raised as part of ‘restarting Brexit preparations’.

This was also reflected in the trend in pre-production stocks, which rose for the first time in five months. Inflationary pressures remained relatively contained, as rates of increase in input costs and selling prices both eased.

Lee Collinson, head of manufacturing at Barclays, said: “It is becoming a real challenge to get a clear picture of the health of UK manufacturing.

“Following the unwinding of months of record stockpiling, some parts of the sector have started to build up inventories again, as the 31 October Brexit deadline looms large.

“The knock-on effect is that this activity is diverting valuable funds away from much-needed investment projects.

“To make matters worse, a growing global economic slowdown is increasingly casting a shadow over the sector, coupled with reports that some EU-based clients are moving their supply chains away from the UK.”

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