Thursday 2 January 2020 10:36 am

UK PMI: Manufacturing sector contracting at fastest rate since 2012

Factory output in the UK fell in December at its fastest rate in eight years, after a slowing global economy helped crimp domestic demand.

The IHS Markit UK Purchasing Managers’ Index (PMI) – measuring the manufacturing and services sectors – fell from 49.1 in November to 45.6. Anything below 50 means the sector has contracted.

Read more: Eurozone PMI: Poor end to the year for European factories

The decline was the largest since 2012 when the UK was emerging from a recession.

Input figures into the PMI total showed that orders, output and employment all fell.

Rob Dobson, economist at IHS Markit said there was weak investment demand on the back at the tail end of last year due to worsening global economic conditions and Brexit uncertainty.

The UK’s PMI drop comes alongside figures showing an 11th straight month of a contracting manufacturing activity throughout the Eurozone.

“With demand weak and confidence remaining subdued, input purchasing was pared back sharply and jobs were cut for the ninth successive month,” Dobson said.

Read more: UK GDP growth revised up but shows underlying slowing of economy, says ONS

“On this basis, it looks like UK manufacturing and the broader economy may both start the new decade as they began the last, too reliant on consumer spending and still waiting for a sustained improvement in investment levels.”

The PMI contraction comes after UK GDP growth slowed to a 1.1 per cent annual rate in the third quarter, while industrial output dropped to a 1.3 per cent annual increase.

Despite this, unemployment is currently at a 44-year low.

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