UK manufacturing PMI 'drops like a stone'

1 November 2011

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1 November 2011 | Angeline Albert 

The UK manufacturing sector fell back into contraction in October. It is now at a 28-month low following a decline in output, new orders and employment.

The Markit/CIPS UK ManufacturingPMI for October, announced today, is 47.4, its lowest level since June 2009. September’s position of marginal growth was 50.8 – where a figure above 50 indicates an increase in activity. 

A loss of contracts among manufacturing companies, low client confidence and market uncertainty resulted in the fastest decline in new orders for 31 months (since March 2009). Companies are reporting weaker demand in both domestic and overseas markets and their backlog of work is also declining. 

The level of incoming new export orders fell for the third month running. Reduced orders were received from customers in mainland Europe, Asia and the US. The reduction is partly linked to clients delaying purchases or destocking in response to deteriorating global economic conditions.

Manufacturers scaled back output in response to the reduction in new orders and made job cuts that led to staffing levels falling for the fourth month running. 

Purchasing activity was also reduced for the third successive month in October. Lower input buying resulted in the sharpest reduction in holdings of raw material inventory for almost two years.

CIPS CEO David Noble, said: “We live in worrying times. The manufacturing sector, which helped to keep growth buoyant earlier in the year, is now struggling to keep its head above water. Following a short-lived improvement last month the manufacturing PMI has now dropped like a stone to a 28-month low and officially into contraction territory.”

The UK government announced yesterday that it has invested £950 million into the UK manufacturing industry to help preserve and boost employment in the sector. It approved 119 bids for funding through the Regional Growth Fund.

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