Financial News: UK Factory Activity Contracts Most In 11 Months

UK Factory Activity Contracts Most In 11 Months

01/02/2025 - 06:09:00 (RTTNews)

(RTTNews) - The UK manufacturing sector deteriorated at the steepest pace in nearly a year in December, as output and new orders and employment fell at faster rates, final survey data released by S&P Global revealed on Thursday.

The manufacturing purchasing managers' index dropped to 47.0 in December from 48.0 in November. Any reading below 50 indicates contraction. The flash reading was also 47.3.

Output declined at the steepest pace since January, and the downturn was widespread across the consumer, intermediate, and investment goods industries. The lower production was due to subdued domestic market sentiment, customer destocking, efforts to prevent inventory building up at manufacturers' own warehouses, and the impact of weaker demand from European clients.

New orders fell further and at the quickest pace since October 2023. Export orders also logged the fastest reduction in ten months amid lower order intakes from clients in Europe, Asia, and the USA.

As a result, manufacturing employment decreased further, with the rate of job shedding hitting a ten-month high in December. Some companies took this action in response to weak market conditions and that forthcoming increases in employers' National Insurance and the NMW/NLW had encouraged cutbacks to working hours and longer-term efforts to restructure workforces.

On the price front, input price inflation accelerated in December, linked to higher costs for raw materials, transportation, material shortages, taxes, and currency fluctuations. Firms also forced to raise their selling prices as the current and expected future cost elevated.

Looking ahead, business confidence eased to a 2-year low in December amid concerns about a lack of market confidence, inflationary pressures, rising costs, and expectations of weaker economic growth looking ahead.

"With costs expected to rise again in early 2025 as the announced budget changes come into actual effect, the Bank of England is likely to remain cautious about further interest rate cuts despite rising signs of economic difficulties," Rob Dobson, Director at S&P Global Market Intelligence, said.

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