Manufacturing activity drops to nine-month low following Budget
The downturn in the manufacturing sector looks set to deepen after a new survey revealed that activity had fallen to its lowest level in nine months.
S&P’s purchasing managers’ index (PMI), which gauges activity across the industry, dropped to 48.0 in November, down from 49.9 in October and below the earlier ‘flash’ estimate of 48.6.
The reading means the PMI had registered below the neutral mark for two consecutive months, raising concerns that the sector might be on the cusp of another contraction.
Rob Dobson, director at S&P Global Market Intelligence, said manufacturing was struggling due to a combination of high costs, weak demand and concerns over the economic outlook.
The survey suggested that the government’s tax hikes had prompted firms to re-appraise budgets, weighing on investment and contributing to another reduction in employment.
The rate of job losses in November was the fastest since February, with cuts linked to concerns over higher cost pressures. Dobson said the tax hikes will likely “raise costs further in 2025”.
“There has been a wave of concern amongst manufacturers regarding rising costs,” Mike Thornton, national head of manufacturing at RSM UK, said.
“There is a noticeable dip in the employment index…with many businesses likely pausing recruitment efforts due to the anticipated financial strain,” he added.
Overseas appetite for British goods, meanwhile, fell for the 31st consecutive month, with falling demand in the US, China and the EU.
Smaller firms were hit particularly badly, suffering from the steepest declines in output, new orders and new exports business.
Despite rising costs and weak demand, business confidence remained relatively resilient. Just over half (52 per cent) of firms forecast that production would increase over the coming year, while only 11 per cent expected contraction.
The survey suggested that product launches, planned expansions and hopes of an economic recovery helped support confidence.
November also saw an increase in input inflation on the back of higher costs for chemicals, energy, food, paper and timber. Increased freight costs, raw material shortages and the Red Sea crisis also contributed to rising price pressures.