UK factory output continues to slide - PMI
By Abigail Townsend
Date: Wednesday 01 Nov 2023
(Sharecast News) - The UK construction sector continued to struggle in October, a closely-watched survey showed on Wednesday, with both output and new orders on the back foot.
October's S&P Global CIPS manufacturing purchasing managers' index was 44.8, marginally up on September's 44.3 but below both consensus and the earlier flash estimate for 45.2.
A balance above the neutral 50.0 level indicates growth, while one below it suggests contraction.
The output component of the index edged down to 44.3 from 44.6 a month earlier, the longest run of contractions since the financial crisis.
Respondents also pointed to lower new orders and employment, while business optimism fell to a 10-month low. A total of 54% of respondents expect output to rise in the coming year while 36% forecast stagnation.
Rob Dobson, director at S&P Global Market Intelligence, said: "The UK manufacturing downturn continued at the start of the final quarter of the year, meaning the factor sector remains a weight dragging on an economy already skirting with recession.
"Production volumes contracted for the eighth consecutive month, the longest sequence of continual decline since 2008/09, as weak demand at home and overseas led to a further retrenchment of new order intakes."
John Glen, chief economist at the Chartered Institute of Procurement & Supply, said: "Job losses continued as cuts in operational capacity seemed to be the only way for firms struggling to pay bills to keep their heads above water.
"An improvement in input costs, which fell for the sixth month in a row, and improved delivery times were not enough to boost the sector back into growth."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Businesses are responding to the surge in borrowing costs and the improvement in supply chains by reducing their inventors of finished goods and by refraining from placing new orders with suppliers.
"This process likely has many months left to run, given that in the second quarter, the economy-wide stock of inventory was equivalent to 9.7% of GDP, well above its 9.1% average in the second half of the 2010s.
"Accordingly, we doubt that manufacturing output will start to recover until early next year."
The survey of around 650 manufacturers was carried out between 12 and 26 October.
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