Manufacturing output falls despite overall supply chain optimism, according to April PMIs

Wed 3 May 2023
Posted by: Phillip Adnett
Trade News

Worker in factory manufacturing goods with power tools

British factory output and new orders contracted at the start of the second quarter of 2023, but manufacturers were more optimistic and input costs rose at the weakest rate since May 2020, according to newly released data.

The S&P Global/CIPS UK manufacturing Purchasing Managers’ Index (PMI) fell to a three-month low of 47.8 in April from 47.9 in March, although this is still below the 50 threshold representing growth.

Britain’s economy has defied forecasts that it would slip into a recession, but has seen the slowest recovery of G7 countries, Reuters reports.

‘Subdued mood’

Rob Dobson, director at S&P Global Market Intelligence, noted the “subdued mood of the market, with both domestic and export customers remaining reticent to commit to new contracts”.

There was better news on supply chains, where supplier lead times have shortened in each of the past three months with improved resource availability and lower raw material price pressures, he said.

“Better-running supply chains have helped manufacturers reduce backlogs of orders, accumulated in prior months amid component shortages,” he added.

S&P Global said its gauge of future production hit the highest since February last year, with 61% of factories expecting output to rise in the coming year.

However, the decline in overseas demand for British goods gathered pace, contracting for the 15th month in a row.

Global demand

Commenting on the data, Fhaheen Khan, senior economist at Make UK, said it pointed to a worsening of business conditions for manufacturers as firms experience declines output and orders.

“Whilst there is a slowdown earmarked for this year, the survey’s indications mainly reflect businesses running down pre-built safety stocks as expectations for easing supply-chain disruption finally start to take shape allowing manufacturers to produce more efficiently.

“However, there remains a material risk to global demand falling as manufacturing sectors in other countries, mainly Europe, continue to slow-down which make it difficult for manufacturers to forward plan.”

Minister for makers

Industry campaigner, Andrea Wilson, operations director of engineering company Hone-All Precision, told the Manufacturer that a dedicated minister for manufacturing was needed to recognise the issues faced by the sector.

She said: “We need someone within government who recognises the massive contribution we make, is passionate about the sector and starts listening to the needs of the sectors and SMEs.

“Everywhere you look, even the bigger companies in the sector are saying we need a long-term strategy for industry and yet we’re still not seeing it.”

Lords calls for ‘reset’

Meanwhile, UK lawmakers have said the government needs to change post-Brexit visa rules to help firms overcome worsening labour shortages.

The complexity of post-Brexit visa regulations has proved a “significant barrier to mobility”, according to a report by the House of Lords European Affairs committee.

It identified hospitality, catering, tourism, transport, logistics and storage, as well as production and manufacturing as the sectors “most severely impacted”, reports City AM.

Committee chairman Lord Kinnoull called on the government to “intensify engagement with the EU”, saying that the relationship has been “characterised by tension and mistrust” since Brexit.