UK manufacturing sector falters as headwinds mount

by | Oct 3, 2022

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The UK manufacturing sector continued to struggle last month, a closely-watched survey showed on Monday, with both orders and output falling.
September’s S&P Global CIPS UK Manufacturing Purchasing Managers’ Index came in at 48.4, up on August’s print of 47.3 but below the flash estimate of 48.5. It also missed consensus.

The output index rose to 44.2 from 42.7 in August, while the new orders index edged up to 44.8 from 43.9. Both remain firmly below the key 50 level, however. A reading above that indicates growth, while a reading below 50 suggests contraction.

Output has now fallen for three months, as production is scaled back in response to lower orders. “There were reports of expected orders being postponed, or cancelled, due to factors such as rising uncertainty, inflationary pressure and the cost of living crisis,” S&P Global noted.

New export business also fell at the quickest pace since May 2020, despite the weak pound, with reports of lower demand from the US, European Union and China.

“Manufacturers faced weak global market conditions, rising uncertainty, high transportation costs reducing competitiveness and longer lead times, leading to cancelled orders,” S&P Global noted.

Rob Dobson, director at S&P Global Market Intelligence, said: “The downturn in UK manufacturing continued at the end of the third quarter, meaning the goods producing sector looks set to have acted as a drag on GDP.

“Factories are reporting tough market conditions both at home and abroad.

“With existing headwinds from the cost of living crisis likely to be exacerbated by the current volatility in financial markets, growing economic uncertainty and further increases in borrowing rates, the industrial sector is likely to remain in the doldrums during the coming quarter, to add to deepening recession risks.”

John Glen, chief economist at the Chartered Institute of Procurement & Supply, said: “It is tough to predict with any certainty that there could be potential improvement in manufacturing production in the last quarter. It is unlikely that supply chain managers have hedged against the weaknesses in the pound for instance, which will continue to impact on consumers and what consumers will see on shelves as the shopping season begins.”

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: “September’s PMI suggests the sector is heading into a recession.

“The sector was already struggling before the disruption to markets caused by the new chancellor’s mini-budget.”

The survey of a panel of around 650 manufacturers was carried out between 12 and 27 September.

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