UK private sector output falls further in Sep 2022: S&P Global, CIPS

The headline seasonally-adjusted S&P Global-CIPS flash UK composite output index slipped from 49.6 in August to 48.4 in September, indicating a reduction in UK private sector business activity for the second month in a row.

There were a number of reports that a slowdown in sales amid the cost of living crisis and rising economic uncertainty had weighed on activity levels in September.

Export orders fell at a sharp and accelerated rate, with goods producers noting the sharpest drop in foreign demand for 28 months and services companies signalling the first reduction since December 2021.

UK private sector employment increased in September. The rate of expansion was solid overall, but was unchanged on August’s 17-month low.

While manufacturers noted a slightly quicker rise in staffing levels, the rate of job creation was only modest overall. Where higher employment was reported, this was often linked to efforts to fill vacancies and build capacity. However, a further decline in new work meant that outstanding business fell for the second month in a row as signs of spare capacity became more apparent, a press release from S&P Global said.

UK manufacturers also registered a slightly softer, but nonetheless sharp, drop in production (manufacturing output index: 44.4).

Firms often mentioned reducing output volumes due to weaker intakes of new business. Demand conditions overall also weakened for the second successive month in September, with total new work placed with UK private sector firms falling at the quickest pace for 20 months.

Employment remained a bright spot, which continued to rise strongly overall in September, despite the rate of job creation being unchanged from August’s 17-month low.

However, signs of spare capacity became increasingly apparent, with backlogs of work falling at a quicker pace. Although both input costs and output charges rose at softer rates, the increases were still among the steepest seen in the survey’s history.

UK private sector firms expressed reduced optimism towards the 12-month outlook for business activity in September. The overall level of positive sentiment was the lowest seen since May 2020.

Fears of a UK recession, reduced consumer spending, rising costs and interest rate hikes all weighed on company projections for the year ahead. Expectations in the manufacturing sector hit a 29-month low.

ALCHEMPro News Desk (DS)