UK manufacturing PMI signals steepest downturn since 2012

"Only on three occasions since the global financial crisis ten years ago has the goods-producing sector reported a steeper rate of contraction," IHS Markit said in its UK Manufacturing PMI report for August 2019.

The easing in the rate of output decline primarily reflected stock building ahead of a possible disruptive no-deal Brexit at the end of October. Worryingly, while stocks of finished goods rose, inflows of new orders slumped to the greatest extent since July 2012. "The combination of rising inventories and a steeper rate of loss of new orders sends an increasingly negative signal for future production," the report said.

"While we may continue to see some further stockpiling in coming months as the October 31 Brexit deadline nears, the production trend further ahead looks set to deteriorate markedly from already worrying levels in the absence of a revival in demand," Chris Williamson, chief business economist, IHS Markit, said.

The lack of new orders meant backlogs of work likewise fell at one of the sharpest rates seen over the past decade, which in turn encouraged manufacturers to cut headcounts again. Employment fell for the seventh time so far this year, with the rate of job losses continuing to run at one of the steepest seen over the past seven years, the report said.

"The trimming of headcounts also reflected deepening concerns about the outlook. Firms' expectations of future output deteriorated markedly in August to the lowest since data on future expectations were first collected in 2012. Anecdotal survey replies regarding the outlook were increasingly dominated by worries over the disruptive impact of Brexit as well as concerns over a broader slowing of economic growth at home and abroad," the report added.

Both input prices and selling prices continued to rise, in many cases reflecting higher import costs arising from the depreciation of the pound. However, lower global commodity prices, linked in turn to the cooling of global demand, meant the overall rates of inflation remained among the lowest seen since 2016. (RKS)

ALCHEMPro News Desk – India