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Financial News: UK Manufacturing Lowest In Over 6 Years

UK Manufacturing Lowest In Over 6 Years

07/01/2019 - 08:47:00 (RTTNews)

(RTTNews) - The UK manufacturing sector shrunk at the fastest pace in over six years in June, as factories reduced production due to weaker demand, amid the lingering Brexit-and-political uncertainty, thus leading to an erosion of business confidence, results of a survey showed on Monday.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers' Index, or PMI, dropped to 48 from 49.4 in May. Economists had expected the reading to improve modestly to 49.5.

The PMI fell for the third consecutive month and to its lowest level since February 2013. Further, the measure has been below the neutral mark of 50 for consecutive two month for the first time since early-2013.

Production decreased at the fastest pace since October 2012 as new orders fell at the steepest rate in almost seven years.

High stock levels, ongoing Brexit uncertainty, the economic slowdown and rising competition all contributed to the decreases in new orders and production, the IHS Markit survey said.

Export demand weakened for a third straight month and the pace of decline was close to that of May, which was the sharpest fall in four-and-a-years. The slowdown can be blamed on a global economic slowdown and the continued Brexit uncertainty as well as reduced demand from the US, mainland Europe and Australia.

Among various industries, the intermediate goods producing sector was the worst hit with sharp drops in output and new orders. Investment goods sector also witnessed declines, while the consumer goods sector managed further growth, albeit modest.

Consequently, business optimism dropped to its third-lowest level in the survey series history. Yet, 44 percent of manufacturers forecast output growth in one year's time.

Manufacturers shed jobs for the third straight month and backlogs fell at the one of the steepest rates in six-and-a-half years.

"The downturn in UK manufacturing deepened during June, as the impact of firms unwinding stockpiles built before the original Brexit date continued to reverberate through the sector and exacerbate weak demand," Rob Dobson, Director at IHS Markit, said.

"Solid contractions at intermediate and investment goods producers also suggested that businesses were cutting back on both day-to-day and capital spending in increasing numbers," he said.

For manufacturing to see a sustained revival in the coming quarters, there need to be a marked improvement in the economic conditions at home and overseas, together with reductions in both Brexit and domestic political uncertainties, Dobson added.

For comments and feedback: contact editorial@rttnews.com

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