UK Manufacturing Downturn Deepens In May

The British manufacturing downturn worsened in May, as output, new orders and employment all fell at faster rates amid headwinds of weak domestic and foreign market conditions and client de-stocking, survey results from S&P Global revealed Thursday.

The Chartered Institute of Procurement & Supply manufacturing Purchasing Managers’ Index, or PMI, dropped to a four-month low of 47.1 in May from 47.8 in March. The flash estimate was 46.9.

All of the PMI components namely output, new orders, employment, stocks of purchases and supplier lead times signaled a deterioration in operating performance, the survey said.

Production fell for the third straight month in May, linked to weaker new order intakes, component shortages and client de-stocking. The lower output levels were also impacted by the extra bank holiday.

The rate of fall in new orders was the fastest in four months, reflecting weaker demand from domestic and overseas clients.

New work intakes from the US and Europe were weaker due to rising international competition and customers switching to local suppliers to avoid post-Brexit trade and transportation issues.

The survey revealed that UK manufacturing output and new orders declined primarily in the intermediate and investment goods sectors.

Manufacturing employment fell for the eighth successive month because of redundancies, non-replacement of leavers and over-staffing.

On a positive note, both cost pressures and supply chain issues eased in May. Firms linked this to better material availability and reduced logistical issues. Selling prices also increased at a slower pace.

Goods producers’ outlook remained positive in May amid positive clues of new product launches, hopes for a more conducive cost environment and a prospective market recovery.

“More interest rate rises increasing business costs and the pressure from stubborn inflation will continue to keep business owners awake at night,” John Glen, chief economist at CIPS, said.

“The threat of recession narrowly missed at the end of last year hasn’t passed entirely so businesses will be tightening their belts for lean times to come which could include more job shedding and reduced operations.”

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