Manufacturing growth hits 27-month low

Will Green is news editor of Supply Management
1 November 2018

Growth in UK manufacturing slumped to a 27-month low in October while raw material purchasing declined for the first time in more than two years.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index fell to 51.1 in October, down on a revised reading of 53.6 in September and against the no-change reading of 50.

The decline in raw material purchasing, the first since July 2016, was attributed to cost control initiatives and efforts to protect cash flow. Inventories of finished goods and purchases edged lower.

Input price inflation remained marked, despite easing to a 28-month low, with firms linking the increase to higher costs of aluminium, energy, oil, steel and timber, rising import duties and exchange rate fluctuations. Market volatility and Brexit uncertainty also played a part. Output charges rose at the slowest pace in just over two years.

The weakness in new orders was mainly centred on the consumer goods sector, while intermediate and investment goods both posted mild expansions.

Manufacturers maintained a positive outlook, with more than 48% expecting output to be higher one year from now.

Duncan Brock, group director at CIPS, said: “Alarm bells were ringing in the sector this month as the index slipped closer to edge of the no-change mark, with purchasing falling for the first time in over two years. Overall activity was marred by a drop in export orders and continuing weak domestic demand as Brexit took another bite out of client confidence.

“To see inflows of new orders first decline since the middle of 2016, following the referendum, will send shivers down the spine of business. Any hope that the current situation would not continue to impact has surely now evaporated.”

Rob Dobson, director at IHS Markit, said: “Alongside [a] halt in hiring, the increasingly defensive position of UK manufacturers was also reflected in the slight decreases in purchasing activity and inventory holdings, which firms linked to  protecting cash flow and cost-cutting.

“There was some better news on the prices front, however, with input cost inflation dipping to its lowest for over two years as many global commodity prices fell.”

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