FX.co ★ UK Manufacturing Activity Slips Into Contraction

UK manufacturing activity experienced a downturn at the outset of the second quarter, with fluctuating output levels, new orders dwindling due to market instability, customer inventory reduction, and interruptions within the supply chain.

Wednesday's survey revealed that the final manufacturing Purchasing Managers' Index, as issued by S&P Global, plummeted to 49.1 in April, descending from a 20-month peak of 50.3 in the previous month of March. This figure, however, surpasses the preliminary estimate of 48.7.

Out of the five components comprising the PMI, four experienced contractions in April. The only aspect that defied this downward pattern was supplier delivery timings.

Production continued its downward trend, driven primarily by downturns in the intermediate and investment goods industries. New business also contracted in April due to softened demand from both local and foreign markets, causing new export business to register its 27th consecutive month of decline.

Purchasing costs recorded a consecutive four-month high in April, with the rate of increase touching levels unseen since February 2023. Factors such as rising energy, polymer, steel, textile, timber, and transportation costs led to an increase in input prices. Manufacturers reacted to these rising costs by inflating their selling prices, driving output charge inflation to an 11-month high.

Employment levels saw a dip for the 19th consecutive month, primarily in the consumer and intermediate goods sectors. In addition, there were reductions in the volumes of input buying and further depletion of purchase and finished goods stock levels.

The Red Sea crisis continued to disrupt business as usual, causing vendor lead times to extend for the fourth month in a row.

Despite these challenges, manufacturers remained optimistic for April, anticipating a resurgence in demand, new product launches, efficiency improvements, and overall enhancements in market conditions.