Uncertainty remains watchword for manufacturing

Will Green is news editor of Supply Management
1 June 2020

UK manufacturing continued to shrink in May but the rate of decline eased from April’s record low.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index climbed to 40.7 in May, up on 32.6 in April but still below the neutral 50 reading.

Output, new orders and new export business all contracted across consumer, intermediate and investment goods producers.

Pockets of growth were linked to healthcare-related and PPE products, while some firms noted inflows of business showed signs of restarting as lockdown restrictions in the UK and abroad gradually ease.

Vendor lead times lengthened to the second-greatest degree in survey history despite a further marked reduction in purchasing activity at manufacturers. Stocks of inputs and finished goods were both depleted.

Input cost inflation remained mild and companies reported that higher costs resulting from supply chain disruptions were partly offset by supplier discounts offered in response to weak demand and lower prices for oil and plastics. Part of the increase in costs was passed on to clients through higher selling prices.

Duncan Brock, group director at CIPS, said: “Even with the slight uplift in May’s sentiment as firms began to recover from the initial shock and looked to the future, optimism remained depressed.

“Worries over safety for returning staff and repairs to broken supply chains will be uppermost in business minds, and are obstacles to be overcome before real recovery can begin. Uncertainty remains the watchword for the months ahead.”

Rob Dobson, director at IHS Markit, said: “Pressure on manufacturers should ease further as lockdown restrictions are loosened, customers return to work and global activity restarts.

“However, changes to working practices, uncertainty about how long the Covid-19 restrictions may be in place for, weak demand and Brexit worries all suggest the UK is set for a drawn-out economic recovery. This will make the new normal one of the toughest recovery environments many manufacturers will ever have to face.”

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