UK manufacturing downturn deepens as output & new orders fall rapidly

The S&P Global / CIPS UK Manufacturing Purchasing Managers' Index (PMI) recorded a score of 43.0 in August, dropping from 45.3 in July. This score signifies the lowest level since May 2020 and is indicative of rapidly deteriorating conditions in the manufacturing sector.

Manufacturing output experienced a further downturn in August, marking the sixth consecutive month of decline. The rate of contraction reached its steepest level in a year, driven by a slowdown in market conditions, declining new order intakes, and an attempt to reduce inventories of finished goods.

New order intakes saw an accelerated decline in August due to worsening market conditions domestically and internationally. Weaker global economic conditions affected order intakes from key markets such as the US, Europe, China, and South America. The rate of decline for both total new orders and new export business was among the most severe recorded, second only to rates seen during major crises.

Sector-wise data indicated contractions across consumer, intermediate, and investment goods industries. The intermediate goods sector was the worst hit, showing the fastest rates of decline across several variables, including output, new orders, and employment, the report said.

Employment in the manufacturing sector decreased for the eleventh consecutive month. Companies attributed these cuts to reduced new work inflows, falling output volumes, and efforts to control costs. Excess capacity was also noted as a reason for declining employment figures.

Additionally, there was a negative impact on raw material purchasing, stock holdings, and suppliers' delivery times. Input buying fell for the fourteenth month in a row, and at the most rapid rate in nearly three-and-a-half years. Stocks of both inputs and finished goods depleted as companies aimed to cut costs and improve efficiency.

Despite these challenges, manufacturers retained a positive outlook. Optimism reached a four-month high, with 56 per cent of firms expecting growth in the upcoming year, largely based on expectations of market recovery, new product launches, and diversification plans.

ALCHEMPro News Desk (KD)