Manufacturers are “battening down the hatches” ahead of stormy conditions, experts said on Monday as a gauge of the sector showed one of the worst performances in the last 14 years.
The watched S&P Global/CIPS UK Manufacturing PMI survey rose from 43.0 in August to 44.3 in September.
It leaves the sector in heavy contraction – anything below 50 is considered to show it is shrinking – but is a small recovery from August’s 39-month low.
But the score is “still among the weakest readings seen over the past 14 years,” the surveyors said.
The cost of living crisis and recent rapid rise in interest rates are taking their toll, according to producers, raising the possibility of the broader UK economy slipping back into contraction during the second half of the year
Rob Dobson, director at S&P Global Market Intelligence
They said that new export business had fallen for the 20th month in a row, although the rate of decrease slowed.
Employment in the sector also fell for the 12th consecutive month and at the second-fastest rate during that year.
There was some good news among the bad. The costs that manufacturers had to pay for materials and other inputs fell further, at a rate close to August’s more than seven-year record.
That said, the average price at which manufacturers sold their products increased for the first time in four months.
“The cost of living crisis and recent rapid rise in interest rates are taking their toll, according to producers, raising the possibility of the broader UK economy slipping back into contraction during the second half of the year,” said Rob Dobson, director at S&P Global Market Intelligence.
“The downturn is being felt throughout the manufacturing sector, with demand falling from both households and businesses.
“The resulting rise in caution at manufacturers is driving risk aversion and shifting their focus towards margin protection and cost control, highlighted by further cuts in employment, purchasing and inventories.
“These all point to companies battening down the hatches in expectation of stormy conditions ahead.”
There are some small shoots of good news for those looking for grounds for optimism
Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply
Dr John Glen, chief economist at the Chartered Institute of Procurement and Supply, said: “There are some small shoots of good news for those looking for grounds for optimism.
“The drop in demand gave manufacturers space to work through backlogs and build up capacity, while the easing of pressure on supply chains resulted in an improvement in the average supplier delivery times.
“As the Conservative Party gathers in Manchester this week, the manufacturing sector will be looking for policies that can restore business and consumer confidence and help drive back demand.”
