Squeeze still on manufacturing sector, shows PMI

30 April 2009

01 May 2009 | Martha McKenzie-Minifie

The UK manufacturing recession continued in April but the latest Purchasing Managers' Index (PMI) showed conditions had eased slightly.

The CIPS/Markit manufacturing PMI - in which a figure of less than 50 demonstrates contraction - recorded 42.9 in April.

The figure was higher than in March (39.5) but less than the 49.7 recorded in April last year.

CIPS director Roy Ayliffe said it indicated a reprieve for the UK manufacturing sector but he warned a turnaround was still a long way off.

"The industry is firmly embedded in the trenches of the recession," he said.

Global market conditions remained difficult and competitive pressures were strong. The report said "Disinflationary [deflationary] pressures" were felt in the sector last month.

Output prices fell at the fastest pace since PMI records started in November 1999.

The output prices index was 45 last month, compared with 47.1 in March and 61.9 in April last year. Meanwhile, input costs dropped to the greatest extent since February 2002.

Rob Dobson, senior economist at Markit Economics, said: "Caution remains the main watchword for manufacturers, reflected in efforts to trim excess capacity, cut costs and reduce inventory holdings."

Stocks of finished goods declined at the joint second-fastest rate in the survey history and holdings of input inventory also fell sharply.

Companies indicated that stocks were being reduced in line with lower production requirements and to control warehousing and purchasing costs.

The report said confidence among clients remained subdued, leading to the cancellation, postponement or reduction of planned or agreed expenditures.

Jobs in the sector continued to be shed, with more than a third of companies reporting job losses.

The report said large companies cut staff at a faster rate than small to medium-sized businesses. Although still marked, the rate of decline in employment eased to its weakest in the year-to-date.


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