UK manufacturing output fell at the fastest rate since 2012 in March, survey data showed today, as the coronavirus outbreak broke up supply chains and caused demand to slump.
The IHS Markit/Cips purchasing managers’ index (PMI) fell to a three-month low of 47.8 in March, down from 51.7 in February. A score of below 50 indicates contraction in the sector.
“The manufacturing sector was knocked sideways by the impact of Covid-19 and into contraction territory,” said Duncan Brock, group director at Cips, the Chartered Institute of Procurement & Supply.
He said UK factories are “experiencing some of the most challenging trading conditions since PMI records began”.
The dire performance of the manufacturing sector led to the steepest job losses since 2009, data firm IHS Markit said. Meanwhile, business optimism slumped to its lowest level on record.
Supply-chain disruptions were at the heart of the sector’s problems. Material shortages and transport delays caused the steepest increase in vendor lead times in the PMI’s 28-year history, delaying production significantly.
Output and new orders fell across the board, with contractions seen across the consumer, intermediate and investment goods sub-sectors.
Rob Dobson, director at IHS Markit, said pain was “felt across most of manufacturing, with output falling sharply in all major sectors except food production and pharmaceuticals”.
“The transport sector, which includes already-beleaguered car-makers, suffered the steepest downturn.”
Sector in worse place than PMI suggests
Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics, said things were likely to be worse than the PMI suggested.
“The PMI likely greatly understates the pace of the downturn now underway in the manufacturing sector,” he said. “For a start, the PMI perversely is boosted perversely by supply chain disruption.”
He added: “With consumers clamping down on all discretionary spending in the current uncertain environment, the manufacturing sector inevitably will struggle further.”
The UK’s FTSE 100 weakened after the PMI was released. It was down 4.1 per cent in early trading at 5,441 points.
The pound was down 0.5 per cent against the dollar at $1.237. Investors are selling shares in favour of holding cash, especially the dollar, and government bonds due to economic uncertainty.