UK manufacturing contracts

Posted on 20 Dec 2019 and read 802 times
UK manufacturing contractsThe headline seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) slipped to 48.9 in November, down from 49.6 in October.

The PMI has remained below the neutral mark of 50.0 for seven successive months.

November saw a reduction in manufacturing output, with the rate of decline accelerating slightly over the month.

Companies reported scaling back production in response to lower new-order intakes; efforts to reverse high levels of stock holding also contributed to the contraction, as did settling backlogs of work directly from inventories (further reducing the need to maintain production volumes).

New orders fell for the seventh month in a row during November, reflecting tougher conditions in both domestic and overseas markets.

Companies attributed this to de-stocking at clients after the delay to Brexit and the on-going uncertainty surrounding the political, economic and global trade situations, with the decline in new export orders among the steepest registered in the past seven years.

November also saw manufacturing employment fall for the eighth straight month, with the pace of job losses the steepest since September 2012.

The delay to Brexit had a noticeable impact on stock holdings and purchasing activity during November.

Finished-goods inventories fell at the steepest rate in over two-and-a-half years, while input buying volumes fell to one of the greatest extents since early 2013.

These contractions were a marked reversal from the solid increases seen in the lead-up to the 31 October exit date.

Rob Dobson, a director at IHS Markit (www.news.ihsmarkit.com), which compiles the survey, said: “November saw UK manufacturers squeezed between a rock and a hard place, as the uncertainty created by a further delay to Brexit was accompanied by growing paralysis ahead of the General Election.

"Downturns in output and new orders continued, amid a renewed contraction in exports.

The pace of job losses also hit a seven-year high, as firms sought to reduce overheads in the face of falling sales.

"De-stocking at manufacturers and their clients following the latest Brexit delay was a major contributor to the weakness experienced by the sector.

Inflationary pressures meanwhile showed signs of moderating further, with input costs falling slightly, for the first time since March 2016.

“Signs of a two-speed economy persisted, with intensifying business uncertainty leading to a further steep drop in demand for machinery and equipment, as firms cut back on investment, but rising demand for consumer goods suggests that households continue to provide some support to the economy.”

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