Manufacturing sector has shrunk at fastest rate since the early days of the Covid-19, finds survey
October 2023 - Industrial
Manufacturing sector has shrunk at fastest rate since the early days of the Covid-19: Recent data indicates that the manufacturing sector in the UK experienced its most significant contraction (September 2023), since the initial stages of the Covid-19 pandemic.
The latest report from the respected S&P Global/CIPS UK Manufacturing PMI survey reveals that the sector has now been shrinking for 13 consecutive months.
The survey's reading declined from 45.3 in July to 43.0 in August, marking the first time in 39 months that the survey recorded such a low score for the manufacturing sector. Excluding the lockdown caused by the pandemic in the spring of 2020, the survey's performance has not been this poor since the financial crisis in 2009.
According to Rob Dobson, director at S&P Global Market Intelligence, manufacturers are experiencing a decline in the economic landscape due to various factors such as rising interest rates, the cost-of-living crisis, export losses, and market uncertainties.
Business-to-business companies are particularly hard hit by these challenges, found the research. Among different sectors, producers of intermediate goods have witnessed the sharpest declines in output, new orders, and employment.
Despite the overall negative outlook, there were a few positive aspects to consider. Firstly, the Purchasing Managers' Index (PMI) score surpassed experts' expectations, which had predicted a decline to 42.5. Secondly, there are indications that concerns regarding inflation are easing.
Dobson commented that the downturn has a silver lining, as input costs are now declining at the quickest pace since January 2016, and inflationary supply chain issues are subsiding. This development should contribute to lower goods price inflation in the upcoming months. He said:
“Manufacturers reported a weakening economic backdrop as demand is hit by rising interest rates, the cost-of-living crisis, export losses and concerns about the market outlook.
“The survey data therefore suggest policymakers will become increasingly focused on concerns over the economy’s health as they mull the need for further rate hikes.”
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