Markit/CIPS UK Manufacturing PMI®
The performance of the UK manufacturing sector remained lacklustre in September, rounding off one of its weakest quarters during the past two years. The generally subdued trends in both output and new orders during recent months filtered through to the labour market, with manufacturing job losses registered for the first time since April 2013.
The headline seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) eased to 51.5 in September, down from a revised reading of 51.6 in August (originally reported as 51.5). The PMI has now posted above the 50.0 no-change mark for 30 months running. However, the pace of growth signalled during quarters two and three of this year have been weaker than those generally seen earlier in the current growth sequence.
Looking beneath the headline reading also provided a mixed picture for manufacturing. The trend in output growth signalled by the survey improved slightly, taking the rate of increase to a six-month high, but still well off the peaks seen during the opening quarter. New order growth, meanwhile, slipped to the joint-weakest pace in a year.
There was also noticeable variation in the trends between the manufacturing sub-sectors. Consumer goods producers – the star performer in recent surveys – saw a substantial output growth slowdown and a contraction in new order inflows for the first time in almost three-and-a-half years.
In contrast, intermediate goods producers saw a solid increase in output and investment goods production returned to growth. These trends were not repeated for employment, however. Consumer goods sector headcounts rose, investment goods producers made little change in staffing levels and job cuts were signalled by intermediate goods companies.
Cost pressures shifted further to the downside in September, as companies reported lower prices paid for commodities (especially oil and oil-related costs). The rate of cost deflation accelerated to its steepest since February 1999 and remained among the fastest registered in the near 24-year survey history. There was also mention of the exchange rate and competition among suppliers driving costs lower.
Average selling prices were reduced for the first time in three months during September, reflecting competitive pressure and some pass-through of lower input costs to clients. However, the rate of output charge decrease was only modest, with around 8% of companies reporting a reduction.
David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply commented:
“The sector appears to be sidestepping any significant growth this month and offering little in the way of an upbeat performance, and unnerving those who expected a less disappointing result.
“The domestic market continued to be the main contributor to any growth, though the export market showed a flicker of life as order levels improved marginally. The bigger worry is in staffing levels and it was not a good month for the intermediate goods producers on that score with that sector showing the biggest fall in employment. The overall employment index is now hovering just below the no-change mark, its lowest level for two-and-a-half years.
“Input costs continued to fall at their fastest pace in over 16 years, supporting business margins as commodity prices dropped. A minority of companies also reduced their output prices to counteract pricing reductions from their competitors. An element of caution has crept into business sentiment for the future which remains relatively positive in an uninspiring landscape.”
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