Manufacturing declines sharply and leads to job losses

The latest set of manufacturing data from the Chartered Institute of Purchase and Supply (CIPS) shows a sharp downturn in activity which has led to job losses.

The seasonally adjusted Markit/CIPS UK manufacturing Purchasing Managers’ Index (PMI) fell to 47.6 in November, down from a revised October figure of 47.8.

This is the second successive month there has been a fall and the index is now at its lowest level for two and a half years.

Companies have cut back production as a result of lower demand both domestically and to overseas customers. The fall in demand was reflected in staff levels which saw the fastest rate of decline in two years. Input prices fell for the first time since July 2009.

Rob Dobson, Senior Economist at Markit said: “The manufacturing engine has run out of steam. Output is falling at the fastest rate since early 2009 as order inflows from domestic and overseas markets continue to deteriorate.”

Lower production was caused by a significant reduction in new orders and weaker global and domestic economic conditions which have led to a fall in demand. November was the fifth consecutive month that saw a fall in new orders.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply:
“It looks like it’s going to be a bleak winter for UK manufacturers with the PMI showing very little to be positive about at the moment. Exports orders, which UK manufacturers are increasingly dependent on, continue to decline as the eurozone crisis impacts demand in US and Asia as well as Europe.

“Worryingly, employees are already being affected by the downturn as we see the fastest rate of job cuts since the end of 2009. With new orders and outstanding business falling, it seems likely there will be more job losses to come next year.”

Analysts believe that the manufacturing figures could signal a fall in economic growth and a contraction in GDP quarters. This will also be affected by tomorrow’s construction sector PMI and Monday’s services sector figures.

Howard Archer, Chief UK & European Economist at IHS Global Insight said: “The purchasing managers’ survey is grim, indicating that the sector is enduring a torrid time and is on course for clear contraction in the fourth quarter. Manufacturers are currently being battered by major domestic and international headwinds. Domestic demand for manufactured goods is being held back by the major squeeze on consumers’ purchasing power.”

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