UK Manufacturing Moves Deep Into Contraction
The UK manufacturing sector has experienced a significant decline in December, as tough market conditions domestically and globally have dampened demand. According to survey results from S&P Global, the Chartered Institute of Procurement & Supply final Manufacturing Purchasing Managers’ Index (PMI) dropped to 46.2 in December, compared to November’s seven-month high of 47.2.
This latest figure marks the tenth successive month of manufacturing production decline, with consumer and intermediate goods sub-industries being the most affected. Despite some expansion in investment goods, it was not enough to offset the overall contraction in the sector.
The downturn in manufacturing output can be attributed to weaker new orders, reduced demand from foreign markets, and efforts to trim stocks. New orders fell for the ninth consecutive month, reflecting a weak economic backdrop. Foreign demand, especially from the US, mainland China, mainland Europe, and Canada, was also remarkably low.
Backlogs of work also saw a sharp decline in December, while job losses were recorded for the fifteenth consecutive month. Redundancies, efficiency gains, hiring freezes, and cost control measures have contributed to the ongoing job losses in the sector.
Moreover, input buying has been consistently reduced for the eighteenth straight month, leading to depleted inventories of both inputs and finished products. On the price front, input costs fell further due to lower costs across various sectors, such as chemicals, foodstuffs, metals, paper, plastics, and timber. However, there was a slight increase in selling prices for the second consecutive month.
The future outlook for the manufacturing sector appears bleak, as business optimism dropped to a one-year low. Factors such as a faltering economy, client closures, and high interest rates have contributed to this decline. Despite the pessimism, companies still expect production to increase over the next twelve months.
In conclusion, the UK manufacturing sector is deep in contraction, with December witnessing an accelerated downturn in output. This challenging environment, marked by weak demand and reduced new orders, has led to job losses and depleted inventories. The future outlook remains uncertain, with concerns over the economy and other external factors influencing business optimism.
Note: The information provided is based on the survey results from S&P Global and the Chartered Institute of Procurement & Supply.
