The IHS Markit CIPS UK Manufacturing PMI® read 47.4 in August, down from 48.0 in July and at its lowest since July 2012. Output volumes fell as intake of new work contracted at the fastest pace for more than seven years. Business optimism also fell to a record low.
Steep reductions in new orders were reported across consumer, intermediate and investment goods manufacturing. The contraction in orders was linked to weaker domestic and global economic conditions, low market confidence, Brexit concerns, business uncertainty and a slowdown in customer spending.
New export business contracted at the fastest rate in seven years. Inflow from USA and Asia weakened and there were reports EU-based customers were re-routing supply chains away from the United Kingdom.
40% of companies still forecast output growth in the coming year against 13% anticipating decline. However, that still pulled the overall reading down to the lowest since Markit started surveying business optimism in 2012.
Manufacturing employment fell at one of the fastest rates in the last six year, driven by cost saving initiatives in the form of reorganisations and redundancies.
Finished goods inventories increased slightly; input stocks fell. Input inflation remained ‘solid’ with 80% of companies that provided a reason citing the exchange rate for Sterling. Increased costs were passed onto customers, further increasing average selling prices.