Manufacturing downturn ‘deepens’ as production drop among fastest on record
UK manufacturing hit a steep slump this month, figures revealed, as production dropped by a rate “one of the fastest in survey history”.
According to the Chartered Institute of Procurement & Supply (CIPS) the UK manufacturing purchasing managers index (PMI) recorded 43.0 in August, down from 45.3 in July.
This marked its lowest level since May 2020, with experts citing “rising interest rates, the cost-of-living crisis, export losses and concerns about the market outlook” as underlying it.
It comes despite August also reporting purchasing costs fall for the fourth month in a row and drop at the steepest rate since January 2016, including on energy, fuel and metals.
And manufacturers reported an optimistic outlook, with 56 per cent of firms saying they expect to grow in the next year – linked to new products launching and plans for acquisitions.
Rob Dobson, from S&P Global Market Intelligence, said: “August saw a further deepening of the UK manufacturing downturn.
“The PMI sank to a 39-month low as output and new orders contracted at rates rarely seen outside of major periods of economic stress such as the global financial crisis and the pandemic lockdowns.”
A weakening economic backdrop is emerging, as demand continues to suffer. While firms cited slower market conditions, declining new orders and efforts to reduce inventory as being behind the latest contraction, amid “deteriorating market conditions” at home and overseas.
Dr. John Glen, CIPS chief economist, said: “Another substantial fall in manufacturing activity, contracting for the sixth month in a row and the fastest rate since May 2020, showed that these are tough times for manufacturers.”
He added: “The constant pressures on business costs from inflation and the systemic weaknesses in the UK and global economies were also driving the fastest fall in new orders since the financial crisis, outside the pandemic years.
“As a result, manufacturers were forced to reduce the size of operations, headcounts and reassess what business is likely to look like – in a highly competitive economic environment.”
Intermediate goods – items used to produce other goods for sale – were worst hit, but downturns were also recorded across consumer and investment products.
Staff levels in manufacturing fell for the 11th successive month in August, as some firms linked lower employment to lowering demand, cost control and excess factory capacity.