Monday 3 December 2018 10:49 am

Manufacturing PMI offers ‘crumb of positive news’ amid lacklustre conditions and Brexit uncertainty

City A.M’s industry and manufacturing correspondent. You can follow me on @alexmdaniel, or email:

City A.M’s industry and manufacturing correspondent. You can follow me on @alexmdaniel, or email:

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The UK manufacturing sector offered “a crumb of positive news” this morning as it announced the rate of improvement for business conditions improved slightly in November, but remained relatively subdued as the inflow of new export orders fell further.

This month’s IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose to rose to a two-month high of 53.1, up from October’s 27-month low of 51.1.

But despite the gain, the sector’s performance remained “lacklustre”, according to Rob Dobson, director at IHS Markit, with the latest PMI still among the weakest in the last two-and-a-half years.

The trend in output strengthened slightly during November, as the intake of new orders rose after October's lull, driven by new product launches and client stock-building. The domestic market remained the prime source of new contract wins.

New export business dropped for the second straight month, however, the first back-to-back contractions since early 2016. Companies said this was fuelled by fewer clients from overseas being interested in business, as well as ongoing Brexit uncertainty. The only sector which saw an increase in new export business was consumer goods.

Companies remained confident moving into the Christmas period, with 46 per cent forecasting output would be higher in one year's time and less than one-in-ten expecting a contraction.

Manufacturers said they hoped for recovery in market demand, planned marketing strategies, new product launches, investment in new machinery and planned business expansion.

But, overall optimism dipped to a 27-month low, as Brexit uncertainty, exchange rate concerns and a slowing economy weighed on company confidence.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply said: “The sector offered a crumb of positive news this month with a small uplift in overall activity and greater purchasing volumes suggesting that the sector is strengthening at last.

"The leading light that was new export orders weakened for a second consecutive month as domestic clients contributed to the pipeline of new work. Also fears over possible raw material shortages in the coming months meant some firms were hoarding stocks to weather any supply chain disruptions. Suppliers remained in control, and this further frustrated business already tussling the longer lead times and stock unavailability.

“Businesses looked to new product launches and greater efficiencies along with reduced finished goods inventories to increase cash flow. It appears these are currently the only weapons in the sector’s armoury as uncertainty lingers and the battle for an agreed Brexit continues.”