Updated May 1st, 2024 at 14:15 IST

UK manufacturing slips into contraction as cost pressures mount: PMI data

Despite a slightly less severe decline than initially anticipated, the PMI fell to 49.1 in April, down from 50.3 in March.

Reported by: Business Desk
Manufacturing | Image:Unsplash
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UK Manufacturing PMI: The latest survey data reveals a concerning downturn in British manufacturing during April, accompanied by escalating cost pressures, according to the S&P Global UK Manufacturing Purchasing Managers' Index (PMI) released on Wednesday.

Despite a slightly less severe decline than initially anticipated, the PMI fell to 49.1 in April, down from 50.3 in March. This drop signifies a return to contraction territory for the manufacturing sector, after briefly crossing the growth threshold for the first time since July 2022.

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Key indicators including output, new orders, and employment all registered declines, painting a bleak picture of the industry's performance. Of particular concern is the rapid acceleration in input cost pressures, which reached their highest level since February 2023. The spike in costs, attributed to rising energy and material prices, along with increased wage bills at suppliers, is likely to be closely monitored by the Bank of England ahead of its upcoming interest rate meeting.

The surge in input costs is mirrored by a corresponding increase in selling prices, rising at the fastest pace since May 2023. The inflationary trend underlines the challenges faced by manufacturers in maintaining profitability amid mounting cost burdens.

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Rob Dobson, Director at S&P Global Market Intelligence, highlighted the multifaceted challenges contributing to the manufacturing downturn. Weak market confidence, client destocking, and disruptions stemming from global geopolitical tensions, notably the ongoing Red Sea crisis, have all contributed to a decline in both domestic and overseas demand.

Moreover, the subdued outlook is reflected in the PMI's measure of optimism, which hit a four-month low. This waning confidence underscores the prevailing uncertainty surrounding the sector's recovery prospects.

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The contrasting performance of manufacturing against the services sector, which witnessed accelerated growth in April, further emphasizes the challenges faced by manufacturers amidst a challenging economic landscape.

Dobson also underscored the broader implications of rising cost pressures for inflationary dynamics, noting the implications for achieving target consumer price inflation. The sustained growth in costs, coupled with higher selling prices, poses challenges for policymakers seeking a sustainable path towards price stability.

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(With Reuters inputs)
 

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Published May 1st, 2024 at 14:15 IST