Pace of decline quickens in UK manufacturing

1 November 2012

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1 November 2012 | Adam Leach

A fall in new orders for the seventh consecutive month pushed the UK manufacturing sector into further turmoil as activity contracted.

The Markit/CIPS UK Manufacturing PMI for October reported a figure of 47.5 for the month, significantly below the break-even point of 50. The figure indicates that not only did activity drop over the period, but the rate of decline sped up, with the September figure at 48.1 (revised down since the original results were published).

The main reasons for the drop were a more pronounced fall in new orders, weakened demand from foreign markets and the ever-present factor of economic turmoil in Europe. Employment in the sector dropped for the second month in a row, although the drop was less marked as companies opted not to replace staff who had left or made people redundant. The report also found the amount of input buying by manufacturers had declined at one of the fastest rates in the past three and half years.

While the PMI offered little cheer for the sector as a whole, it found that consumer goods manufacturers fared better. The sector recovered from its contraction in September and also reported a rise in demand for goods.

CIPS CEO David Noble, said: “The industry continues to suffer from a potent cocktail of declining export sales, depressed demand and rising cost pressures, which have resulted in a hangover that the industry has been struggling to shake off all year. There is little in last month’s figures to encourage the industry.”

Rob Dobson, senior economist at Markit, also took a broadly negative view of the figures, but added: “There are some pockets of positivity. The consumer goods sector bounced back robustly in October to really buck the wider trend. This chimes with ongoing signs that domestic retail sales volumes are holding up reasonably well.”

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