UK manufacturing slows sharply, while US improves at a faster pace

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UK: 

Conditions in the UK’s manufacturing sector slowed sharply in October due to new order inflows decreasing for the first time since July 2016.  Companies linked this to lower inflows of new work from overseas and softer expansion of domestic demand. 

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The IHS Markit/CIPS Purchasing Manager’s Index (PMI) fell to a 27-month low throughout October to 51.1, down from September’s revived reading of 53.6. The data collection was undertaken between 12-26 October, closing before the Chancellor’s budget on the 29th. 

A decline in new orders led to a sharp slowdown in the rate of expansion for manufacturing production. Output growth was the weakest since the increase trend began in August 2016. This growth was signalled in the investment goods sectors, while the consumer goods division saw a slight fall in production.   

Efforts to protect cash flow also added to the decline in raw material purchasing, the first since July 2016, and lower stock holdings.  

Input price inflation remained marked in October, even though it eased to a 28-month low. Businesses linked the increase to the higher prices of aluminium, energy, steel, timber, oil, rising import duties, exchange rate variations, market instability and Brexit uncertainty.  

However, UK manufacturers still had an optimistic outlook in October, with over 48% expecting output to be higher one year from now. This view reflected new product launches, new capacity and export opportunities.  

 

US: 

Operating conditions improved at a faster pace in October for U.S manufacturing as there was a big increase in new business.  

The rise in total new work reached a five-month high, even though there was only a small improvement in new export orders registered. Price pressures remained strong, although rates of input price and output charge inflation accelerated. 

This is shown in the IHS Markit PMI, which increased slightly from 55.6 in September to 55.7 in October, making it a five-month high. The PMI was pushed by a stronger expansion in new business received by goods producers in October.  

The improvement in new orders also accelerated to a five-month high and was linked to greater client demand across the domestic market. New export orders grew only slightly and at the weakest pace in the three months of growth.  

Panellists attributed the rise in output to greater client demand and increased efforts to clear backlogs.  

Manufacturing companies recorded pressures on profit in October, with the rate of input price inflation accelerating to a market place. This increase reached a three-month high and is linked to a higher raw material and material prices rising from the ongoing impacts of tariffs.  

From this, manufacturers tried to pass on higher cost burdens to their clients through higher output charges, and although the rate of output price inflation was the fastest since July, it remained below that seen for input costs.  

Firms registered a strong rise in buying activity following reports of efforts to stockpile. However, output expectations towards the next year improved, with companies suggesting that anticipations of further new order growth drove optimism.  

 

Eurozone: 

For the Eurozone, the growth was the weakest in 26-months, and is in line with the decreasing trend seen in the last two-months. 

The IHS Markit Eurozone Manufacturing PMI declined to a rate of 52.0 in October, compared to 53.2 in September.  

Italy registered its lowest PMI reading in just short of four years at 49.2, while Germany was the weakest in nearly two and a half years (52.2 – a 29-month low). 

Spain and France were the only countries in the Eurozone to improve manufacturing activity, although they were modest gains.  

However, the Netherlands continued to record strong growth (57.1), though the pace of expansion was the lowest in 21 months. 

The downturn in overall growth was closely linked to a decline in overall order books and the weakening global trade cycle.  

 

China: 

China’s PMI for October was 50.2, down on September when the figure was 50.8. 

The main raw materials index was down to 47.2 in October, a decrease of 0.6 from last month, and lower than the threshold. This suggests that Chinese demand for materials is still declining.

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