Manufacturing PMI hits six-year low

Will Green is news editor of Supply Management
1 July 2019

UK manufacturing contracted again in June as the PMI hit a six-year low.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index slumped to 48, down on 49.4 in May and the third successive month of falling readings. Readings below 50 indicate contraction.

Demand from domestic and foreign markets weakened during June, with new orders declining for the third month in a row, with soft global economic growth and Brexit uncertainty the main factors. There was specific mention of reduced new work from the US, mainland Europe and Australia.

The intermediate goods sector was the worst affected, seeing the steepest drop in output and new orders, and investment goods also saw contractions. Consumer goods saw growth, but with sharp slowdowns.

Business optimism dropped to its third-lowest level in the index’s history and employment fell for the third straight month.

Duncan Brock, group director at CIPS, said: “With clients starting to unwind pre-March Brexit stockpiles new orders from domestic and export markets failed to materialise as the global economy also slowed down. Companies resorted to job losses to reduce the slack in production capacity, as employment fell for the third month in a row.

“A small silver lining for the sector, arrived in the form of a weaker rate of average input price inflation compared to the last couple of years and businesses tried to claw back some of the margins lost in previous months by increasing their own prices.”

Rob Dobson, director at IHS Markit, said: “There will need to be a substantial improvement in economic conditions at home and overseas, alongside reductions in both Brexit and domestic political uncertainties, if manufacturing is to see a sustained revival in the coming quarters.”

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