The downturn in the UK manufacturing sector continued in September, according to the UK manufacturing PMI, and although the contraction was shallower than the prior survey month, levels of output, new orders, new export business, and employment all fell further.
Stocks of purchases and input buying volumes also rose for the first time in recent months, as some companies restarted their Brexit preparations.
The headline seasonally adjusted IHS Markit/CIPS PMI rose slightly to 48.3 in September, up from August’s six-and-a-half year low of 47.4.
The headline index has now remained below the neutral 50.0 mark for five successive months, its longest sequence below that mark since mid-2009.
Manufacturing production continued to contract in September, as companies cut back output in response to a further reduction in new order intakes.
The investment goods sector was by far the weakest performer, seeing the steepest drops in both output and new business.
This reflected a reluctance among clients to commit to capital expenditure due to ongoing market uncertainties, including economic, political, and Brexit related reasons.
The consumer goods sector was the only category to see output rise in September, as production in the intermediate goods industry stagnated.
However, the outlook for both sectors remained lacklustre, as intakes of new work decreased in both during September.
Rob Dobson, Director at IHS Markit, said: “The UK manufacturing downturn continued in September, adding to signs that the sector may be sliding into recession.”
“Output, new orders, and employment all fell further, as rising political, trade, and economic uncertainties exacerbated concerns about Brexit.”
“Some manufacturers noted increased inventory building activity in preparation for the forthcoming exit date, but the impact of such Brexit-related stock building was dwarfed by weakening demand for other customers, due in part to clients routing supply chains away from the UK.”
“The rate of job losses accelerated to a six-and-a-half year high, highlighting how manufacturers are increasingly seeking to cut costs. Similarly, the investment goods sector was especially hard hit in September, seeing the sharpest drops in production and new business, as clients reined in capital spending while conditions remained volatile.”
“The shroud of uncertainty also weighed on manufacturers’ confidence, which remained at one of its lowest ebbs in the survey’s history. These headwinds all ensure that manufacturing will likely remain a drag on UK economic growth during the months ahead.”
Seamus Nevin, Chief Economist at Make UK, said: “At the end of this month the UK is set to leave the EU, and as the uncertainty grows, levels of output, new orders, new export business, investment, and employment are continuing to fall.”
“Were it not for the emergency stockpiling activities that took place ahead of our original EU exit date last March, the UK manufacturing sector would already be in recession. Stocks of purchase and input buying volumes have now started to rise again, as companies recommence their costly no-deal Brexit contingency activities.”
“Job losses are widespread across the sector as its continued weakness has seen employment fall at the most severe rate since the peak of the Global Financial Crisis. There are now roughly 126,000 fewer people working in the industry than there were in June 2016.”
“UK manufacturers are also losing customers and production continued to contract in September as companies cut back output in response to further reductions in new orders received.”
“While global markets are also faltering, with orders from the USA and Asia are shrinking, and growth in the Eurozone, the UK’s biggest export market, declining slightly following last month’s improvement, anxiety about the UK’s post-Brexit trade rules is clearly the biggest factor affecting British manufacturers right now.”
