UK manufacturing suffers sharpest contraction in over six years, PMI survey shows

Headline PMI index at lowest level since February 2013 as production falls at fastest pace since October 2012

Olesya Dmitracova
Economics and Business Editor
Monday 01 July 2019 10:39
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Early example of the new Mini being made at the factory at Cowley, Oxford
Early example of the new Mini being made at the factory at Cowley, Oxford

Earlier pre-Brexit stockpiling and weaker demand at home and abroad has led to an unexpectedly steep contraction in UK manufacturing in June, an industry survey showed on Monday.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 48 last month, the lowest level since February 2013, with production falling at the fastest pace since October 2012.

The headline index – based on measures of new orders, output, employment, suppliers’ delivery times and stocks of purchases – stood at 49.4 in May. A reading below 50 indicates a contraction compared with the previous month.

Employment in the sector fell for the third straight month in June and confidence dropped to one of its lowest levels in the survey’s history.

“The triple whammy of the Brexit-delay fallout, weaker domestic and export demand impacted on new orders, optimism and job creation, and the sector was left gasping for breath,” said Duncan Brock, group director at the Chartered Institute of Procurement & Supply.

“All the signs from the manufacturing sector point to another decline next month unless someone pulls a rabbit out of the Brexit hat.”

Thomas Pugh, UK economist at Capital Economics, said the results suggest manufacturing output shrank in the second quarter. He added that they raise the risk of a deeper contraction in the whole economy than the 0.1 per cent quarterly fall in GDP in his current forecast.

EY ITEM Club made similar comments on the findings, predicting a 0.2 per cent fall in GDP between April and June.

The PMI survey confirms the downward trend revealed a quarterly poll from the British Chambers of Commerce, which showed that factories’ sales rose at the slowest pace in seven years between April and June.

Despite the gloomy overall results, there were glimmers of hope in the PMI survey. Almost 44 percent of companies predicted higher output in one year's time, while only 14 per cent expected a decrease. Average input prices were also rising less quickly than what became the norm in recent years.

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