CIPS News


Manufacturing sector slows further at end of 2015

CIPS 4 January 2016

UK Manufacturing PMI at 51.9 in December, down from 52.5 in November 

Markit/CIPS UK Manufacturing PMI® 

Key points:

  • UK Manufacturing PMI at 51.9 in December, down from 52.5 in November
  • Output and new order growth slow further 
  • Performance over 2015 as a whole below that seen in 2014 

 

The end of 2015 saw the rate of growth in the UK manufacturing sector slow further from the recent peak reached in October. At 51.9 in December, the seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) slipped back towards its long-run survey average of 51.5. 

Over the final quarter as a whole, the average readings for the headline PMI, Output Index, New Orders Index, New Export Orders Index and Employment Index were all above their respective averages. However, averages over 2015 were in each case below those achieved in 2014. 

Manufacturing production rose for the thirty-third month running in December, underpinned by higher intakes of new business from both domestic and export clients. The consumer goods sector remained the prime driver of production and new order growth, despite seeing its rates of expansion ease over the month. Similar decelerations were also seen at intermediate and investment goods producers. 

New export orders rose for the fourth consecutive month in December, although the rate of increase eased to its weakest since September. Growth of new export business was driven by improved demand from clients in continental Europe, the USA, China, Scandinavia, Turkey, Singapore and the UAE. 

The sustained upturn in output and new orders encouraged manufacturers to implement a modest increase in staffing levels during December. Employment rose for thirtieth time in the past 32 months, following no change in November. 

Although the rate of job creation was only mild, the expansion nonetheless remained broad-based in nature. Increases were signalled across the consumer, intermediate and investment goods sectors and at SMEs and large-sized companies alike. Higher employment also supported efforts to clear backlogs of work, as did a further reduction in stocks of finished goods. 

Average input prices continued to fall at a sharp pace during December, albeit the slowest signalled in five months. Lower costs were attributed to recent falls in global commodity prices, especially oil. There was also some mention of exchange rate factors contributing to the reduction. 

Part of the decline in purchasing costs was passed through to clients in the form of lower output charges. However, the rate of deflation was only marginal and the weakest during the current four-month sequence of decrease. 

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply commented: 

“A muted end to the year with more subdued levels of production and the weakest level of expansion reported for three months. Any rise in production was attributed to new orders from domestic but also export markets as the sector saw an increase in demand from the States, Singapore and China, as well as Europe. 

Stock levels were reduced for the tenth successive month as firms made efforts to improve on work backlogs. 

Staffing levels also improved, from last month’s stagnant position, and this month more jobs were created across all sub-sectors and at both SMEs and larger companies. Falling input prices improved business margins as many firms seemed reluctant to pass on savings to clients to make up any perceived losses suffered earlier in the year.” 

Ends 
The January 2016 Report on Manufacturing will be published on: Monday 1 February 2016 at 9:30am (UTC) 

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