The sector last month saw declines in output and new orders which were among the steepest registered outside of events such as the global financial crisis and Covid-19 pandemic, and employment fell for an 11th straight month, according to the survey published by the Chartered Institute of Procurement & Supply and S&P Global.

The manufacturing purchasing managers’ index plummeted from 45.3 in July to 43 in August on a seasonally adjusted basis. This took it even further below the level of 50 deemed to separate expansion from contraction to signal the sharpest deterioration in conditions in the UK manufacturing sector in 39 months.

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Production volumes in the UK manufacturing sector have now declined for six straight months.

CIPS and S&P Global flagged the impact on demand in the sector from rising interest rates, the cost of living crisis, export losses and “concerns about the market outlook”.

They noted the rate of contraction in manufacturing output accelerated to its steepest in a year in August, and that the decline recorded last month is one of the fastest in the survey history. Companies mentioned slower market conditions, declining new order intakes and efforts to reduce inventories of finished goods as factors underlying the latest contraction.

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August saw an accelerated decrease in new order intakes, with the effect of deteriorating market conditions at home and in overseas markets on demand flagged.

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CIPS and S&P Global cited “declining order intakes from key markets such as the US, Europe, China and South America”.

John Glen, chief economist at CIPS, summed up the dismal situation.

He said: “Another substantial fall in manufacturing activity, contracting for the sixth month in a row and [at] the fastest rate since May 2020, showed that these are tough times for manufacturers.

“The constant pressures on business costs from inflation and the systemic weaknesses in the UK and global economies were also driving the fastest fall in new orders since the financial crisis, outside the pandemic years. As a result, manufacturers were forced to reduce the size of their business operations, their headcounts and reassess what business is likely to look like in the remainder of the year and in a highly competitive economic environment.”

So were there any brighter spots in the survey?

Amid the falls in output, new orders and employment, CIPS and S&P Global noted that manufacturers had “maintained a positive outlook despite the current economic malaise”. Optimism among manufacturers hit a four-month high, with 56% of firms expecting growth over the coming year. This was linked to hopes of a market revival, new product launches and acquisition and diversification plans.

It is certainly good that manufacturers have not given up hope. They will need all the optimism they can muster to navigate a most unappealing set of challenges.


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