U.K. Manufacturing Output Contracts as New Orders Plunge
An employee pushes a trolley at a factory in Blyth. (Photographer: Matthew Lloyd/Bloomberg)

U.K. Manufacturing Output Contracts as New Orders Plunge

(Bloomberg) -- U.K. manufacturing output matched its sharpest downturn in more than seven years in December and orders for new work from domestic and overseas clients plunged.

IHS Markit said Thursday that the industry as a whole shrank for an eighth straight month as concerns over the economic, political and global trade outlook weighed on demand. Meanwhile, companies continued to run down stocks purchased in the run up to the now delayed Oct. 31 deadline for Brexit, it said.

The report showed the firm’s headline Purchasing Managers Index for the sector fell to 47.5 in the month -- the second weakest reading since 2012 -- and compared with a flash estimate of 47.4.

The data were collected Dec. 5-18, meaning the period included the days immediately following Boris Johnson’s decisive election win on Dec. 12.

“In the closing stages of the year the sector has ended on a dreary note,” said Duncan Brock, group director at the Chartered Institute of Procurement and Supply. “Though the result of the general election will bring some clarity to businesses, it still feels like a long road ahead for manufacturing to recover its losses from this year.”

Key Insights

  • Measures of new work declined for an eighth month, while employment extended its run of losses since April
  • Lower headcount reflected “weaker demand, productivity gains, cost reduction initiatives, ongoing uncertainties and recruitment freezes,” Markit said
  • Sentiment fell on the month, but remained positive amid reduced uncertainty
  • Manufacturers raised output charges by the greatest extent in six months

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  • Markit is due to publish similar indexes for the U.K.’s construction and dominant services sector in coming days
  • An initial flash estimate put the reading for services at 49, and a composite measure for the whole economy at 48.5 -- the lowest since the aftermath of the 2016 referendum

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Also read: United Kingdom Affirmed by S&P, Outlook Remains Negative

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