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Output, new orders and employment fall at record rates in UK

Christian Fernsby |
The public health emergency caused by the outbreak of coronavirus disease 2019 (COVID-19) caused substantial disruption across the UK manufacturing sector and its supply chains in April.

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Topics: EMPLOYMENT    UK   

Manufacturing production, new orders and employment all contracted at the fastest rates in the 28-year survey history, while vendor lead times lengthened to the greatest extent so far.

The global pandemic also hit overseas demand, leading to a series-record drop in new export business.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to a record low of 32.6 in April, down from 47.8 in March.

The fall in the Manufacturing PMI (which is a composite of five indices) was softened by a comparatively modest reduction in stocks of purchases and record lengthening of vendor lead times (which has an inverse contribution to the PMI level).

Survey data were collected between 7-27 April.

Response levels were similar to those observed before the outbreak.

The survey-record contractions in output, new orders, employment and new export business were felt across the manufacturing sector, with series-record declines in each of these variables seen across the consumer, intermediate and investment goods sub-industries.

Companies linked the declines to the consequences of the COVID-19 outbreak, particularly regarding company closures, weak domestic and global demand and labour shortages (following job losses and staff furloughs).

In the few cases where companies reported an increase in either output or new orders, this was generally from those producing (or repurposed to produce) medical- or food-related goods.

Business sentiment also remained low by the historical standards of the survey in April.

Although companies still forecast (on average) that output would be higher one year from now, the degree of positive sentiment was up only slightly from March’s record low.

While the hardship caused by the ongoing pandemic continued to depress confidence, some manufacturers indicated that an end to (or at least an easing of) the COVID-19 crisis would hopefully lead to a restart of economic activity both at home and abroad.

Vendor lead times lengthened to the greatest extent in the 28-year survey history, reflecting logistical issues, border difficulties for overseas goods and delays to shipping and air freight.

Some manufacturers also experienced constraints due to closures or capacity shortages at suppliers.

This was despite a series-record reduction in purchasing activity.

Stocks of inputs and finished products both decreased during the latest month.

Price inflationary pressures remained only mild during April.

Average input costs rose only slightly and to the least marked extent in the current five-month sequence of increase, as higher prices resulting from shortages and transportation costs were partly offset by lower oil prices and some suppliers lowering their charges in the face of weak demand.

Selling price inflation was at a near four-year low.


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