UK manufacturing downturn eases, but sentiment remains "lacklustre"
By Benjamin Chiou
Date: Monday 03 Feb 2025
(Sharecast News) - The decline in UK manufacturing activity eased more than expected in January, though confidence among purchasing managers remained weak as companies grapple with weak demand and rising costs.
The final reading of the S&P Global UK manufacturing purchasing managers' index (PMI) came in at 48.3 last month, up from the preliminary reading of 48.2 released two weeks ago.
This marked a rebound from December's 11-month low of 47.0 but was still firmly below the neutral 50-point level which separates contraction and growth.
January saw the fourth straight monthly deterioration in operating conditions with four of the PMI's five components - output, new orders, employment and stocks of purchases - all showing a decline.
Average vendor lead times were the only component to show an increase over the month, due to increased shipping times, the Red Sea crisis, backlogs at ports, container shortages and regulatory issues.
Optimism levels among manufacturers stayed close to their lowest levels over the past two years, showing only a mild improvement from the 24-month low reached in December. According to S&P Global, the lacklustre sentiment was blamed on "government policy, recession fears, rising costs, higher interest rate expectations and cutbacks to nonessential spending".
Employment levels in manufacturing also fell for the third consecutive month, declining at their fastest pace in 11 months. This was partly as a result of layoffs and workforce restructuring across the sector, which purchasing managers linked to minimum wage increases and national insurance increases announced in the autumn budget.
Rob Dobson, director at S&P Global Market Intelligence, said there was "little scope for any imminent improvement" across the sector due to weak demand and rising cost pressures.
"A stagnant economy and rising cost burdens leave policy makers with a real dilemma, balancing the need for rate cuts to support flagging growth and a declining labour market against the need to contain inflationary pressures," he said.
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