UK Manufacturing Activity Contracts Most Since 2020

The UK manufacturing sector registered its sharpest contraction since May 2020 on steep decreases in production and order intake, final survey results from S&P Global showed Thursday.

The Chartered Institute of Procurement & Supply factory Purchasing Managers’ Index fell to 47.3 in August from 52.1 in July. But the score was above the flash estimate of 46.0.

This was the first sub-50.0 PMI reading since May 2020, suggesting a contraction in the manufacturing sector.

There were substantial decreases in production across the consumer, intermediate and investment goods sectors. In addition, intakes of new work declined at the quickest pace for 27 months amid weaker inflows from both domestic and overseas markets.

Jobs growth ground to a near standstill pace, which was the weakest during the current 20-month sequence of increase.

Further, lower new order intakes enabled firms to catch-up on backlogs. At the same time, stocks of purchases and finished goods both continued to expand.

Optimism among manufacturers slumped to a 28-month low, amid rising concerns about a possible UK recession and strong inflationary pressures.

On the price front, the survey showed that input costs grew at the weakest pace since November 2020. Selling price inflation continued to ease in broad lockstep with purchase prices.

The slowdown in input and output price inflation could take some considerable pressure off consumer price inflation in the coming months, Rob Dobson, director at S&P Global Market Intelligence, said. However, energy prices remain a key concern and area of great uncertainty moving into the autumn.

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