By Daniel Hunter
The UK manufacturing sector saw overall operating conditions deteriorate for the sixth successive month in October. Companies continued to face a combination of declining export sales, weaker domestic demand and rising cost pressures.
At 47.5 in October, from a revised figure of 48.1 in September, the seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) fell for the second successive month and to its lowest level since July this year. The latest reading was broadly in line with the average for Q3 2012 as a whole.
Production volumes were scaled back for the fourth straight month in October, with the rate of decline the second-sharpest during the past three-and-a- half years. The main factor underlying lower output was a further reduction in new work received. Total new orders fell for the seventh month running and at a faster pace than in September.
“So this is the 6th consecutive month of contraction for the manufacturing sector in the UK, the longest since the 14 months of contraction seen at the height of the credit crunch in late 2008 and 2009," Jeremy Cook, Chief Economist at World First foreign exchange said.
"The reasons behind the slowdown are well known to all involved in the industry; slowing exports as a result of the global slide in confidence, while cost pressures have hammered margins further. There is no real reason to suggest this should turn around anytime soon however, and we would expect the 2 month trend of deterioration in the employment component to continue as job losses become necessary in an effort to save costs."
Manufacturers linked lower levels of new business to reduced inflows of new export orders and weaker domestic demand. New export business declined at the second-fastest pace in just over a year, mainly due to the ongoing economic weakness seen in mainland Europe. There were also some reports of lower demand from clients in Asia.
There were nonetheless some brighter spots in the UK manufacturing sector in October. Although conditions deteriorated in the intermediate and investment goods sectors, output in the consumer goods sector bounced back strongly from September’s contraction. Consumer goods producers also bucked the wider trend by seeing improved demand from both domestic and overseas clients.
Manufacturing employment declined for the second successive month in October, although the rate of job losses was less marked than in the prior survey period. Where a reduction was reported, this generally reflected lower demand, redundancies and the non-replacement of leavers.
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