Markit/CIPS UK Manufacturing PMI® UK Manufacturing
- UK Manufacturing PMI at 49.2 in April
- Near-stagnant trends in output and new orders
- Price deflationary pressures ease
April saw the seasonally adjusted Markit/CIPS Purchasing Managers’ Index® (PMI® ) fall below the critical no-change mark of 50.0 for the first time since March 2013. At 49.2, from a downwardly revised reading of 50.7 in March, the headline index was dragged lower by lacklustre trends in production and new orders and declines in both employment and stocks of purchases.
The weakening performance of the manufacturing economy was mainly felt in the consumer and investment goods sectors, with both registering declines in production and new work received. Although the intermediate goods sector managed to sustain growth of output and new order inflows, rates of expansion were weaker than in the prior month.
Companies generally attributed the deterioration in operating conditions to a combination of softer growth of domestic demand and a reduction in new business from overseas. There were also a few reports that uncertainties regarding the oil & gas industry, retail sector and the upcoming EU referendum had led some clients to delay spending.
New export orders fell for the fourth straight month in April, albeit only marginally, as global economic growth continued to slow. Investment goods producers reported a sharp drop in new export business, in contrast to the mild improvements seen in the consumer and intermediate goods sectors.
The downturn at manufacturers was reflected in the labour market at the start of the second quarter. Job cuts were reported for the fourth successive month, with the rate of decline the fastest since February 2013. Losses were mainly centred on large-sized companies, as SMEs recorded (on average) a further increase in workforce numbers.
On the prices front, deflationary pressures continued to ease in April. Average input costs fell at the slowest pace since June 2015, while the rate of decline in selling prices was only marginal and the weakest in the current eight-month sequence of reduction. Where a decrease in either input or output prices was recorded, companies continued to link this to competitive market conditions.
Average vendor performance improved for the first time in almost three years during April. However, this was mainly the result of reduced demand for raw materials, as manufacturers lowered their level of purchasing activity for the third straight month. Part of the decrease in input buying volumes reflected a preference for lower inventory holdings.
Rob Dobson, Senior Economist at survey compilers Markit: “The UK Manufacturing PMI fell below its critical 50.0 mark for the first time in over three years in April, highlighting a further deepening of the sector’s downturn at the start of the second quarter.
“On this evidence manufacturing production is now falling at a quarterly pace of around 1%, and will likely act as a drag on the economy again during the second quarter and putting greater pressure on the service sector to sustain GDP growth. The manufacturing labour market is also being impacted, with the data signalling close to 20,000 job losses over the past three months.
“Manufacturers are emphasising slower domestic demand growth and declining new export orders as the key weaknesses they are facing, amid rising uncertainty about the global economy, the oil & gas industry, retail sector and the EU referendum. With this backdrop unlikely to change in the coming months, the second quarter is likely to remain a bleak landscape for industry.”
David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply: “Recent fears over a stall in the UK’s manufacturing sector have now become a reality and driven the steepest decline in the manufacturing PMI for three years. An atmosphere of deep unease is building throughout the manufacturing supply chain, eating away at new orders, reducing British exports and putting more jobs at risk.
“A sense of apprehension across the sector is being caused by enduring volatility in the oil and gas industry, falling retailer confidence and the uncertainty created by the EU referendum. In a month that saw the collapse of BHS, the troubles in the British High Street are being felt just as keenly in Britain’s factories. Manufacturers are compensating for stalling new order growth by depleting their stocks, and dramatically cutting the amount of raw materials they buy from suppliers.
“Manufacturing jobs are under pressure, with the sharpest overall decline in employment since February 2013. The sector is nervously waiting to see whether this is a temporary blip or the beginning of a more pervasive slow down. For their part, suppliers are taking up the challenge, cutting delivery times for the first time since May 2013, but they are already feeling the pinch from falling prices. We are in for a nervous few months for the manufacturing industry.”
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