UK factory output slumps at fastest rate since May 2020

theguardian.com:

UK factory production slumped in August at the fastest rate since the early Covid-19 pandemic lockdown month of May 2020 after manufacturers suffered a sharp reversal in new orders from domestic and overseas customers.

Analysts said a manufacturing recession had begun after firms reported that clients had “postponed, rescheduled or cancelled agreements” in response to economic uncertainties, soaring inflation and component shortages.

The survey compiler, S&P Global, said its CIPS UK manufacturing purchasing managers’ index (PMI) fell to 47.3 in August, down from 52.1 in July, where a figure below 50 signifies a contraction in activity.

The output index plunged to 42.7 from 48.9 in July and new orders followed the same pattern, dropping to 43.9. Export orders suffered an even larger contraction, falling to 42.7 in August from 46.4 in July.

Backlogs of work, which have kept many firms going through the spring and early summer, also fell away in August, adding to the sense of gloom in the industry.

Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said: “The PMI suggests that a recession is developing in the manufacturing sector.”

He said the tendency to stockpile components and raw materials over the last year in response to supply chain blockages had also left firms vulnerable to being left with unsold stock during a downturn.

James Brougham, a senior economist at the manufacturers’ lobby group Make UK, said the PMI showed the trend was “recessionary” after the worst performance in more than two years.

“Industry is finding maintaining output levels a significant challenge, especially when average input prices are a whopping 22.6% higher now than they were at the same time last year.

“One enduring