UK manufacturing stumbles, hits 4-month low in May 2023: S&P Global

May saw manufacturing production scaled back for the third consecutive month. Alongside weaker new order intakes, component shortages and client destocking, output levels were also impacted by the extra bank holiday.

The level of new business declined again in May. The rate of contraction was the fastest in four months, reflecting weaker demand from domestic and overseas clients. Customer destocking, subdued market confidence, and economic slowdown all weighed on new work inflows, as per S&P Global.

New export orders fell for the sixteenth consecutive month in May, as overseas demand for UK manufactured products remained lacklustre. There were reports of weaker new work intakes from the US and Europe, linked to rising international competition and (in the case of the EU) customers switching to local sources to avoid post-Brexit trade and transportation complications.

Sector data signalled that the downturns in UK manufacturing output and new orders were both focussed on the intermediate and investment goods industries. The consumer goods category was a brighter spot, seeing production and new work rise at the fastest rates since February 2022.

Manufacturers' outlook stayed positive in May, with 57 per cent forecasting production would be higher in 12 months' time and only 7 per cent anticipating a contraction. Confidence was linked to new product launches, hopes for a more conducive cost environment and a prospective market recovery.

Near-term concerns about weaker demand and cost considerations continued to drive trends in staffing, purchasing and input stock holding, however. Job losses were registered for the eighth month running, amid reports of redundancies, non-replacement of leavers and overstaffing. Input buying volumes and stocks of purchases also contracted.

Manufacturers saw improved news on the costs and supply fronts during May. Following a long and often marked period of sustained purchase price increases, the latest survey saw a mild fall in average input costs. That said, the impact was mainly felt in the intermediate goods industry, as consumer and investment goods producers continued to report increases (albeit at slower rates).

Pressure on supply chains continued to ease in May, as average vendor performance improved to an extent similar (but not quite matching) March's survey record high. Manufacturers linked this to better material availability and reduced logistical issues.

Average output charges rose again during May, as manufacturers acted to protect and repair margins from the damage caused by recent steep cost increases. However, with market demand weak and signs of inflationary pressure potentially stabilising, the rate of increase in selling prices was the weakest for two-and-a-half years.

Fibre2Fashion News Desk (DP)