UK manufacturers had another difficult month in January 2023, according to newly released data.
The January edition of the S&P Global/CIPS manufacturing Purchasing Managers’ Index (PMI) showed a reading of 47.0.
This was an improvement on December’s 45.3 result. However, it represents the sixth successive month the PMI has remained below 50, the number indicating an economic contraction.
Firms reported problems caused by staff and material shortages, as well as lower orders.
Issues relating to Brexit and problems at UK ports hurt exports, while weak growth in the US, Asia, and Europe and the Middle East caused further damage to international trade, as reported by Reuters.
Positive news
But there were some glimmers of positivity in the results.
Companies generally remained hopeful for the future, with optimism rising to its highest levels since April 2022, according to The Manufacturer.
57% of respondents stated that they believed output would be higher in one year’s time, and there were some indications of falling supply chain constraints.
Rob Dobson, director at S&P Global Market Intelligence, said:
“UK manufacturers faced a tough operating environment at the start of 2023, leading to reducing intakes of new business, declining production volumes and lower staffing levels. Weak demand at home and overseas, supply chain constraints, strikes and the continuing impact of high inflation all stymied the performance of manufacturers.
“There were some shoots of positivity developing, however. Rates of contraction are generally lower than before the turn of the year, a possible sign that we may be past the worst of the downturn in industry. Cost inflation also eased further, while supply chain delays were the least pronounced for three years.”
BOE decision
The results of the PMI were released before the latest effort by the Bank of England to fight inflation.
According to the Guardian, in a widely expected move the bank raised interest rates by 0.5 percentage points to 4%. Speaking at the meeting, Bank of England governor, Andrew Bailey, said the UK would enter recession in 2023, but that it would be less serious than previously predicted.
The Bank hopes increased rates will help it tackle consumer inflation, which is currently at 10.5%.
Eurozone eases
S&P’s Eurozone PMI showed the region was also experiencing a continuing downturn in the manufacturing sector, although the outlook seemed to be improving.
For January, the PMI showed a reading of 48.8. This represented an improvement on December’s 47.8 result and is a five-month high.
Chris Williamson, chief business economist at S&P, said:
“Although Euro area manufacturers continued to report falling output and deteriorating order books in January, sustaining the sector’s downturn for an eighth successive month, the picture is considerably brighter than the lows seen back in last October heading into the winter.
“Not only has the rate of output decline moderated now for three consecutive months, but business optimism about the year ahead has also surged higher over the past three months.”
Williamson noted that worries over gas and supply chains looked to have eased considerably.