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Financial News: UK Manufacturing Contraction Continues Amid Supply Chain P

UK Manufacturing Contraction Continues Amid Supply Chain Pressures

02/01/2024 - 07:51:00 (RTTNews)

(RTTNews) - British factory activity deteriorated further at the start of the year amid the lower output and new orders as the Red Sea crisis badly impacted the supply chains, survey results from S&P Global revealed Thursday.

The Chartered Institute of Procurement & Supply Manufacturing Purchasing Managers' Index, or PMI, rose to 47.0 in January from 46.2 in December.

The flash score was 47.3. Any reading below 50 indicates contraction in the sector.

Manufacturing production declined for the eleventh successive month in January due to weaker new work inflows and supply chain delays.

Output contracted across all three major sectors, including the consumer, intermediate, and investment goods industries.

New orders fell further at the start of 2024 due to low customer confidence, order cancellations, and client destocking.

Export demand weakened, and lower new orders mostly came from the US, mainland China, the EU, Canada, and the Middle East.

The increasing geopolitical tensions focused on the Red Sea route to the Suez Canal led to a marked rise in average vendor lead times during January as inputs ordered from overseas were re-routed around the lower tip of Africa, the survey said.

Supplier performance deteriorated for the first time in a year, to its worst level since November 2022.

Disrupted key global trade routes caused higher input costs for chemicals, electronics, energy, food stuffs, metals, packaging, and timber. With this, the selling price rose at a faster rate.

British manufacturers were also forced to cut employment, purchasing activity, and stock holdings in January. Besides this, finished goods inventories fell at the quickest rate in almost two-and-a-half years.

Nonetheless, UK manufacturers maintained a positive outlook as business optimism rose to a four-month high, reflecting new product launches, expectations of economic recovery, and planned marketing efforts.

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