UK, US, China and Eurozone manufacturing slumps

Manufacturing warehouse
Manufacturing warehouse


The UK manufacturing industry showed increased signs of renewed contraction in May, as the headline seasonally adjusted IHS Markit/CIPS purchasing Manager’ Index (PMI) registered at 49.4, down dramatically from 53.1 in April.  


This is the first time since July 2016 that the PMI has fallen below the neutral 50.0 benchmark.  

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Manufacturers reported increased difficulties in convincing clients to commit to new contracts during May. This reflects the already high level of inventories following stockpiling activity in advance of the original Brexit date.  

The total volume of new business placed fell for the first time in seven months, with the rate of contraction the greatest since July 2016, and one of the fastest seen in the past-six-and-a-half years.  

New order inflows declined from both domestic and overseas sources, while new export business fell for the second month in a row, and at the quickest pace in over four-and-a-half years. 

Manufacturers reported lower demand from Asia and Europe, and there was also mention of Brexit uncertainty, including clients diverting supply chains away from the UK, leading to smaller demand from within the EU. 

The trend in production was the weakest during the past 34 months, as an increase at larger firms was mostly offset by contractions at small- and medium-sized companies.  

Sub-sector data signalled that the weakness was confined to the intermediate and investment goods industries, as they both saw output, new orders and employment decrease during May. However, consumer goods producers saw output, new business and staffing levels rise.  

May saw the trends in inventory holdings and purchasing activity all impacted by the delay to Brexit. 

The latest survey saw an easing in the rate of increase in finished goods stocks, with pre-production inventories dropped for the first time in ten-months. The latter was driven by a sharp pull-back in input buying volumes, which fell at the sharpest rate since July 2016.  

Output charge inflation rose to a three-month high in May, showing a marked acceleration for consumer goods.  

Manufacturers remained optimistic in May, with almost 49% expecting output to be higher in 12 months’ time, compared to 7% forecasting contraction. This optimism was linked to a reduction in uncertainty following Brexit, growth plans, recovery in domestic and overseas demand, new product launches and new technologies.  

However, global trade tensions and Brexit continued to weigh on some firms’ views.  


US manufacturing operations only saw a small improvement in its health throughout May, as output growth eased and new orders fell for the first time since August 2009. 

The PMI registered at 50.5, down from 52.6 in April. This figure showed only a slight improvement in operating conditions, with the latest reading the lowest since September 2009.  

Data for the second quarter so far have signalled a distinct slowdown in the sector compared to the first three months of 2019.  

A main factor for this reading was the softest expansion of output since June 2016, and a marginal rise in production that was linked to clearing backlogs of previously placed orders.  

Manufacturers indicated the first decline in new orders since August 2009, and although only minimal, survey respondents said that weak client demand was to blame for the fall.  

New business from abroad contracted for the first time since July 2018, but only at a marginal rate.  

Expectations for growth dipped to its joint-lowest since the series began in July 2012, as firms showed worries about ongoing trade tensions and growing trends of customers postponing new orders.  

Cost burdens increased at a modest rate throughout May, and it was the slowest since July 2017, with reports of tariffs driving costs higher being countered by increased competition among suppliers.  

Purchasing activity was unchanged in May as companies signalled greater efforts to use current inventories for production and increased efforts to re-adjust stock levels following softer demand conditions.  


The Eurozone’s manufacturing sector remained inside contraction territory throughout May.  

After taking in seasonal factors, the IHS Markit Eurozone Manufacturing PMI registered at 47.7, making it the fourth consecutive month that it has posted below 50.0. This is slightly down on April’s 47.9.  

Weakness of the sector remained centred on the intermediate and investment goods industries, as in both cases, rates of deterioration were marked and contrasted with the performance of the consumer goods division, where growth was sustained to a modest degree. 

The consumer goods sector has now registered continuous expansion for five-and-a-half years.  

As for countries, Germany continued to witness the sharpest decline in manufacturing operations, registering at 44.3, a slight reduction from last month’s reading of 44.4. 

Austria saw the growth of its manufacturing sector decrease to the greatest degree for over four years, registering at 47.8, down from the 49.2 recorded in April.  

Italy’s PMI also remained below the 50.0 threshold (49.5), while marginal growth was seen in France and Spain, 50.6 and 50.2 respectively.  

Greece remained the best-performing country in terms of manufacturing expansion, as it registered at 54.5. 

These decreases of the sector have been linked to declines in order books, as the latest data showed an eighth successive monthly fall in new work received. 

Panellists reported falling demands both at home and abroad, with another fall in new export orders in May.  

The downturn in new work continued to weigh on production, which was reported to be down in May for the fourth successive month. 

However, as the rate of contraction remained modest, and slower than that of new work, firms were able to make inroads into their backlogs. 

There was evidence of emerging slack in supply chains throughout May, as average lead times for the delivery of inputs shortened to the greatest degree since mid-2009.  

Lead times have now improved for three months in a row, in line with declining purchasing activity among manufacturers.  

May’s survey found that input buying was down for a sixth successive month as businesses focused on using existing stock when possible. 

Input cost inflation softened, falling to its lowest level since August 2016, as firms chose to pass on higher operating prices to clients as highlighted by modest increases in output charges. 


China’s PMI for May was 49.4, a decrease from April’s figure of 50.1. 

The raw material inventory was 47.4, an increase from 47.2 last month, but still lower than the 50.0 threshold.  

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