S&P Global PMI Indicates Downturn in UK Manufacturing Amid High Costs

Summary

  • The S&P Global/CIPS manufacturing Purchasing Managers’ Index (PMI) fell to 46.2 in December, ceasing three continuous months of growth and showing a drop from November’s seven-month peak of 47.2.
  • This figure, lower than the preliminary December estimate of 46.4, marked the 17th consecutive month of slumping below the growth threshold of 50.0.
  • In contrast, the country’s considerably larger services sector demonstrated robust growth in the same period, despite the manufacturing sector bearing the increased borrowing costs.

Challenges for the Manufacturing Sector

Rob Dobson, director at S&P Global Market Intelligence, noted a decrease in new orders from both domestic and international markets, especially the European Union, resulted in the leveling-off of manufacturing confidence to the year’s lowest point. This has led to manufacturers scaling back on stock levels, purchases, and employment in a more cautious approach towards costs.

“With rising concerns about high interest rates and the cost-of-living crisis impacting demand, the future appears bleak for manufacturers,” Dobson stated.

Impact on Supply Chain and Pricing

Contrarily, Dobson pointed out that the downturn in demand is positively impacting supply chains. This is manifested in suppliers reducing the prices of raw materials and lead times from vendors further improving.

In terms of pricing, manufacturers have slightly increased their prices for a second consecutive month, a move encouraged by the investment goods sector. The decline in input costs was the smallest since May.

Lastly, it’s essential to consider the potential effects of this ongoing downturn in manufacturing on forex and trading. With the rise in manufacturing costs and the gloomy market outlook, careful asset management and trading strategies regarding stocks and commodities associated with the manufacturing sector is advised.

PIP Penguin
Logo