Manufacturing ‘out of steam’

Posted on 1 Dec 2011

The manufacturing sector last month shrank at the fastest rate since June 2009 according to the November PMI Figures released today.

The Markit/CIPS Manufacturing PMI fell to 47.6 in November, its lowest level since June 2009,  from an upwardly revised 47.8 in October (previously reported as 47.4).

The index, which was below the 50 mark that indicates growth in activity is now at a 28-month low. Worryingly, output also fell last month, reducing at the fastest rate in more than two years and new orders contracted for a fifth straight month, although at a slower pace than October’s results.

Rob Dobson, senior economist at Markit and author of the Markit / Chartered Institute of Supply (CIPS) Manufacturing PMI, said: “The manufacturing engine has run out of steam. Output is falling at the fastest rate since early 2009 as order inflows from domestic and overseas markets continue to deteriorate.”

“Consequently, jobs are being lost at the fastest rate for over two years as producers seek to scale back operating capacity in line with a darkening economic outlook,” added Mr Dobson. The economist went on to point out that job losses will only worsen if order books continue to weaken.

The UK November PMI result followed the likes of China, the world’s largest manufacturing economy, which reported its worst performance in almost three years a narrow result of 49.0.

Lee Hopley, EEF
Ms Lee Hopley, chief economist, EEF

Commenting on today’s UK PMI numbers, EEF the manufacturers’ organisation Chief Economist, Ms Lee Hopley, said: “This is not an encouraging number, suggesting more than a mere slowing in activity from this year’s earlier peaks. The main drag now appears to be on confidence across manufacturing as the economy is being buffeted by increasingly negative news and growing uncertainty in major markets.”

Mark Lee, head of manufacturing at Barclays Corporate, commented on the PMI manufacturing statistics: “With global manufacturing giants including Coca Cola and Toyota announcing major new investment in the UK this week, it is disappointing that the sector as a whole remains so subdued.”

“This lack of confidence and the situation in Europe is now so entwined that despite some positive news for UK industry in the Chancellor’s Statement this week it is difficult to see the mood amongst manufacturers budging much,” said Mr Lee. “Until we see major contracts awarded to UK companies and new infrastructure projects underway, this is unlikely to change.”