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Financial News: UK Manufacturing Shrinks Most In 7 Years

UK Manufacturing Shrinks Most In 7 Years

09/02/2019 - 07:09:00 (RTTNews)

(RTTNews) - The UK manufacturing sector contracted at the fastest pace for seven years in August as high economic and political uncertainty weighed on new work and output volumes, survey results from IHS Markit revealed Monday.

The headline IHS Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index fell to 47.4 in August from 48.0 in July. This was the lowest score since July 2012.

The new work contracted at the fastest pace in 85 months, reflecting weaker domestic and global economic conditions, low market confidence, Brexit concerns and business uncertainty. Within total orders, export business shrank at the fastest pace in over seven years.

Reflecting cost saving initiatives, slower economic growth and the continued impact of Brexit uncertainty, manufacturing employment decreased at one of the fastest rates over the past six-and-a-half years in August.

Input price inflation remained solid due to the exchange rate of currency. Manufacturers passed part of the increase in costs on to clients, leading to a further rise in average selling prices.

Further, business optimism slumped to its weakest level since July 2012.

The current high degree of market uncertainty, both at home and abroad, and currency volatility will need to reduce significantly if UK manufacturing is to make any positive strides towards recovery in the coming months, Rob Dobson, director at IHS Markit, said.

The big picture is that manufacturing is on track to contract for a second consecutive quarter, and a meaningful recovery is unlikely given the ongoing struggles of global manufacturing, Andrew Wishart,, an economist at Capital Economics, said. "Unless there is a no deal Brexit, we think that the UK will avoid recession.

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