Activity in the UK manufacturing sector contracted again in October, according to a survey released on Tuesday.
The S&P Global/CIPS manufacturing purchasing managers’ index fell to a 29-month low of 46.2 from 48.4 in September, remaining below the 50.0 mark that separates contraction from expansion for three months in a row.
Still, it was above the flash estimate of 45.8.
The survey showed that new order intakes fell at the fastest pace since May 2020. This was put down to weaker domestic market, already high stock levels at clients, subdued client confidence and inflationary pressures.
Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing production suffered a further decline at the start of the fourth quarter, with the sector buffeted by weak demand, high inflation, supply-chain constraints and heightened political and economic uncertainties.
“New work intakes fell at the quickest pace since May 2020 as demand in domestic and export markets weakened. While the downturn has lessened the pressure on prices, the weak pound and high energy prices mean elevated cost inflation remains a prime concern for manufacturers.”
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said the PMI data suggest the manufacturing sector is teetering on the edge of a recession.
“While the output index edged up to 45.0 in October, from 44.2 in September, it remained well below 50, and its 51.7 average since January 2020. In addition, the new orders index plunged to 39.9, from 44.8 – its lowest level since the financial crisis in 2009 – excluding the lows hit during the pandemic, as a result of both weakening domestic and external demand,” she said.
“Indeed, the new export orders index fell to 40.6, from 42.2. Demand has buckled under the strain of rapid price rises. True, both the input prices and output prices indices edged down in October to 73.7, from 74.5 and to 65.0, from 66.3, respectively. But both indices still are well above their long-run averages, and survey respondents are continuing to note that higher prices are weighing on demand.
“Production also will drop further over the coming months, as manufacturers rid themselves of excess inventory and run out of work backlogs to deplete.”
