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Financial News: UK Factory Activity Decline Slowest In 6 Months

UK Factory Activity Decline Slowest In 6 Months

11/01/2019 - 09:52:00 (RTTNews)

(RTTNews) - UK manufacturing activity decreased at the slowest pace in six months in October, but remained constrained by ongoing political and economic uncertainties as output, new orders and employment continued to fall, survey data from IHS Markit showed on Friday. The seasonally adjusted IHS Markit/CIPS Purchasing Managers' Index, or PMI, rose to a six-month high of 49.6 in October from 48.3 in September. Economists had forecast a modest improvement to 48.1.

The index climbed for a second successive month, but remained below the neutral 50.0 mark separating expansion from contraction. The survey was conducted between October 11 and 28 ahead of the confirmation of the latest Brexit extension to January 31 and the government's decision to hold an early general election on December 12.

"With a further Brexit extension confirmed and the prospect of a December general election, it looks as if the spectre of uncertainty will cast its shadow over manufacturing for the remainder of 2019," IHS Markit Director Rob Dobson said.

In October, factory output fell at a slower pace and the decline was largely driven by weaker demand from the domestic market. The weakness was partly offset by manufacturers who boosted production to build-up stocks ahead of the October-end Brexit deadline.

New orders shrunk for a sixth month in a row despite a mild improvement in export demand. Ongoing political and economic uncertainties continued to weigh on demand.

Overseas orders rose for the first tie in seven months largely driven by EU demand as clients there brought forward planned purchases ahead of the October-end Brexit date.

Job cuts continued into the seventh consecutive month and the rate of decline was among the sharpest over the last decade.

Employment reduced due to weak demand, softer client confidence, the non-replacement of leavers and staff redundancies. Further, the Brexit uncertainty led to hiring freezes in some cases.

Ahead of the October 31 Brexit deadline, several firms boosted their purchases of inputs and built-up safety stocks. Thus, growth in inventories of finished goods and purchases hit six-month highs, but remained below their survey-records.

On the cost front, input prices were unchanged, which was the first time they failed to rise in over three-and-a-half years. Output price inflation was also one of the weakest seen over the a similar period.

Business confidence in the factory sector improved modestly to a three-month high in October. However, the degree of optimism remained among the lowest since future expectations data were first collected in July 2012.

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