UK manufacturing PMI drops to six year low
The UK manufacturing sector continued to feel the reverberations of unwinding pre-Brexit inventory stockpiling activity, according to the IHS Markit/CIPS UK Manufacturing PMI®. Already high stock levels led to a scaling back of output and new order intakes, with demand from both domestic and export markets weakening.
The IHS Markit/CIPS UK manufacturing PMI read 48.0 for June, down from 49.4 in May, marking the third consecutive monthly fall to the lowest level since February 2013.
Manufacturing production contracted at the fastest pace since October 2012, reflecting reduced intakes of new business, which fell to the greatest extent in almost seven years. Factors reported included: high stock levels, ongoing Brexit uncertainty, the economic slowdown and rising competition. There were specific reports of reduced intakes of new work from the US, mainland Europe and Australia.
The intermediate goods sector was worst affected. Investment goods also saw contractions, with especially marked falls in new orders. Consumer goods manufacturers reported growth but rates of expansion in both output and new work suffered sharp slowdowns. There were job losses in both intermediate and investment goods sectors and backlogs of work fell at one of the fastest rates for more than six years.
June saw a further increase in stocks of finished goods although the rate of growth was down sharply from earlier in the year. Input inventories fell and purchasing activity reduced.
Markit says “all the signs from the manufacturing sector point to another decline next month unless someone pulls a rabbit out of the Brexit hat”.