British manufacturing last month suffered its biggest contraction since the depths of the first COVID-19 lockdown in May 2020
The latest contraction was blamed on the weaker domestic market, already high stock levels at clients, subdued client confidence and inflationary pressures.
The seasonally adjusted S&P Global / CIPS UK Manufacturing Purchasing Managers’ Index® (PMI®) fell to a 29-month low of 46.2 in October, down from 48.4 in September but above
the earlier flash estimate of 45.8. The PMI has remained below the neutral 50.0 mark for three consecutive months.
The impact of lower demand was felt across industry.Although the rate of contraction in production volumes eased to a three-month low in October, the consumer, intermediate and investment goods sectors all saw output decline.
The performance of the intermediate goods sector was especially weak.Sales from overseas clients also fared poorly, with new export business decreasing for the ninth month running in October.
There was mention of the weakening global economic situation, softer Chinese demand, war in Ukraine and ongoing issues relating to Brexit stifling export performance.
The shortfall in new order intakes led to a solid increase in stocks of finished goods. Inventories rose for the sixth consecutive month, albeit at the slowest pace since June.
The deterioration in new order inflows also hurt employment, purchasing activity and manufacturers’ business optimism.
In October. Job losses were reported for the first time since December 2020, reflecting redundancies, cost control initiatives and difficulties in both recruiting and retaining
staff and specific skill sets.
Commenting on the latest survey results, Rob Dobson,Director at S&P Global Market Intelligence, said:
“UK manufacturing production suffered a further decline at the start of the fourth quarter, with the sector buffeted by weak demand, high inflation, supply-chain constraints
and heightened political and economic uncertainties. New work intakes fell at the quickest pace since May 2020 as demand in domestic and export markets weakened. While
the downturn has lessened the pressure on prices, the weak pound and high energy prices mean elevated costinflation remains a prime concern for manufacturers.
“The darkening situation also knocked business optimism down to a two-and-a-half year low, as concerns about the weak demand outlook, recession, inflationary pressure and
sustained uncertainty hit confidence. The labour market picture has also deteriorated, with companies cutting jobs for the first time in almost two years while still struggling to recruit and retain appropriate staff. On current form manufacturing is in no position to help prevent the broader UK economy from sliding into recession.”
