British manufacturing saw its biggest contraction since May 2020, according to a widely-read indicator of economic performance.
October’s S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 46.2 from 48.4 in September – a 29-month low – despite being revised up from an initial ‘flash’ reading of 45.8. Any score below 50 indicates a contraction.
Manufacturing employment fell for the first time since November 2020, the PMI showed.
“Business optimism dipped to a two-and-a-half year low, as weak demand, recession fears, inflationary pressures and rising uncertainty hit confidence,” S&P Global said.
According to Reuters, the PMI is in line with other indicators of Britain’s economy that point to a looming slowdown.
UK manufacturing sector has been hit hard by a drop in new orders amid a global fall in the demand for industrial goods.
The element of the index that tracks domestic and export orders plunged from 44.8 to 39.9 to mark its lowest level since the financial crisis in 2009, but not including the lows hit during the pandemic, reports the Guardian.
Fhaheen Khan, senior economist at the manufacturing industry lobby group Make UK, said a deep recession across the manufacturing sector is almost certain as consumer spending, which had been propping up the economy, dried up.
“It is clear there is a limit to how long this can go on for with a slowdown pointing to further decline and a deep recession next year looking more likely by the day,” he said.
Companies benefited from a slowdown in rising costs, as growth input costs and output charges slowed, but both remained historically high, reports the Scotsman.
Price rises were reported for chemicals, electronics, energy, food, metals, packaging, paper and timber, with companies blaming inflation, the weakened pound and war in Ukraine.
October’s figures confirm last month’s gloomy prediction from Rob Dobson, director at S&P Global Market Intelligence, that the industrial sector was “likely to remain in the doldrums during the coming quarter to add to deepening recession risks”.
Economists at the Economist Intelligence Unit and International Monetary Fund had previously warned of a“shallow but long” recession, as reported by the IOE&IT Daily Update.