The UK manufacturing sector shows signs of slowing, according to latest PMI figures

The upturn in UK Manufacturing sector showed further signs of losing impetus, as the initial boost to growth from the economy reopening faded and job losses accelerated. The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index slipped to 53.7 in October, down on 54.1 in September and against the no-change reading of 50. The expansion in output reflected improved intakes of new work, companies catching up on orders delayed during the first lockdown, and new export business reflecting increased demand from China and the US and Brexit stock building by clients in Europe. (Source: IHS Markit / CIPS UK Manufacturing PMI)

 

• The intermediate and investment goods industries saw marked expansions in production, but the consumer goods sector fell into contraction, with output and new business dropping for the first time since the post-lockdown recovery.

 

• Business optimism was at the highest level since January 2018 but the survey was conducted BEFORE the announcement of a second national lockdown in England.

 

• Employment declined for the ninth successive month and the rate of job losses accelerated, with lower staffing linked to redundancies, recruitment freezes, non-replacement of leavers, workforce restructuring and cost-reduction strategies.

 

• The rate of increase in input prices accelerated to its highest since December 2018, reflecting higher raw material costs, shortages, and suppliers raising prices. Part of this was passed onto clients in higher output charges.

 

See the PMI bulletin here….

 

Commenting on the latest figures:

 

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply: “Though recovery decelerated a little this month, growth in the manufacturing sector remained at a steady pace with new orders rising for the fourth month in a row from domestic and also increasingly export markets. UK and European businesses were stocking up before the Brexit deadline, and as supply chains opened up further, more orders were received from countries like China. “However pressures persisted for manufacturers with delivery times from suppliers lengthening to their greatest extent since June. Though capacity increased where staff returned to work, the rush to complete backlogs of covid-affected work resulted in difficulties in other tiers of the supply chain. Costs rose at the fastest rate since December 2018 as competition intensified for raw materials in short supply. “The higher cost of doing business was not the only cause for alarm this month as the outlook for jobs remained painfully weak. More redundancies and restructures reduced headcounts for the ninth month in a row especially at consumer-facing businesses. As shoppers continue to press pause on spending, firms will be unable to conjure up the business they need to maintain operations leading to a fretful end to the year.”

 

Rob Dobson, Director at IHS Markit, which compiles the survey: “October saw the UK manufacturing recovery continue, albeit with the upturn losing momentum amid ongoing lockdown measures and signs that growth could weaken further in coming months after Brexit-related stockpiling. “The main drag was a fall back into contraction for the consumer goods industry, blamed in part on lockdowns and falling demand as virus worries intensified among households. “There was positive news on the export front, with new orders from overseas rising to the greatest extent in over two-and-a-half years. However, a significant contribution to the improvement in exports came from a temporary boost of Brexit stock building by EU clients, which was evident in one-in-four companies that reported higher exports. “The outlook for the remainder of the year has therefore become increasingly uncertain, with risks tilted to the downside. While most companies maintain a positive outlook, with three-fifths of manufacturers expecting output to rise over the coming year, concerns about near-term risks posed by the pandemic, changes to COVID restrictions and related stimulus measures, plus Brexit anxieties, continue to fog the future.”