An influential study shows that the UK manufacturing sector has contracted for the third time in a month as new orders fall.
The S&P Global/CIPS UK Manufacturing PMI fell to 48.4 in September, slightly recovering from August’s 47.3 and hitting a 27-month low. Anything less than 50 is considered an indication that the sector is shrinking.
S&P Global said in its latest report that the rate of contraction in output eased slightly from last month, but remained at a significant level overall.
Manufacturers have reduced production due to the decrease in new orders. Some of the expected orders have been postponed or canceled due to factors such as heightened uncertainty, inflationary pressures and the cost of living crisis, the report said.
Firms faced an even tougher situation in the export market compared to the domestic market. September saw the fastest pace of new export business deals since May 2020 and reported lower demand from the US, EU and China.
S&P Global Says Manufacturers Face Slower Global Markets, Increased Uncertainty, Rising Shipping Costs That Decrease Competitiveness, and Longer Lead Times Partly Caused by Brexit-Related Paperwork leading to an increase in canceled orders.
“Manufacturing is a , September continued to feel the autumn chill supply (CIPS).
“Supply chain managers were reducing purchases because customers were failing orders or canceling work on hand.”
Meanwhile, both input and output cost inflation have accelerated.
In recent months, UK businesses and households have struggled with rising energy costs, surging borrowing costs and a volatile currency that hit a record low against the US dollar on 26th September.
In theory, a weaker pound should make it cheaper for overseas buyers, boosting demand for UK exports, but it also raises the cost of importing fuel and raw materials, often priced in dollars.
“Unfortunately, exports continue to decline despite a more competitive exchange rate,” said Rob Dobson, director of S&P Global Market Intelligence.
“There was also less positive news on the price front. Both input cost and selling price inflation rose in September, partly related to higher import costs due to the weaker pound.” he added.
PA Media and Reuters contributed to this report.