UK manufacturers faced a tough operating environment at the start of 2023, the latest S&P Global/CIPS UK Manufacturing Purchasing Managers Index (PMI) report showed today.
But the seasonally adjusted manufacturing PMI of 47.0 in January was an improvement on December's 31-month low of 45.3 and above the flash estimate of 46.7, in a sign that the worst could be over.
Nevertheless, the report showed a contraction in the sector for the sixth month in a row.
The report noted output and new orders fell further, leading to job losses for the fourth successive month, while weak demand, elevated price inflation, plus raw material and staff shortages all impacted production.
There was some better news, however, as the downturn showed further signs of easing, cost increases slowed and pressure on supply chains lessened.
The steepest rates of decline in both variables were registered in the intermediate goods category, whereas the contractions seen at investment goods producers were only mild in both relative and absolute terms.
????????The downturn across the #UK manufacturing sector softened in January (#PMI headline at 47.0; Dec: 45.3) but reductions in output and demand were sustained. Read more: https://t.co/4OvYrVUK3U @cipsnews pic.twitter.com/3K8h9sq742
— S&P Global PMI™ (@SPGlobalPMI) February 1, 2023
Samuel Tombs, chief UK economist at Pantheon Macroeconomics commented: “January’s S&P survey brings some hope that the downturn in the manufacturing sector is slowing down.”
He said expectations of future orders might reflect “hope that lower energy prices will both reduce costs and trigger a strengthening in underlying consumer demand later this year.”
Analysts at the EY ITEM Club agreed that “a marked rise in business optimism offers some good news, as does the recent fall in energy prices” but cautioned that the headwinds facing the sector mean it “doesn't expect a significant turnaround in H1 2023.”
Maddie Walker, Industry X lead at Accenture UK described it as a “mixed landscape for manufacturers right now.”
“There are signs from across the economy that inflation is easing. However, the impact continues to be felt as energy costs and pricing remain well above the average that businesses have gotten used to.
“Certain industries, such as car production, also continue to be hampered by semiconductor shortages and factory closures,” she said.