New figures from the CBI and Markit, show mixed news for the manufacturing sector. According to figures released from the CBI, manufacturing output and exports have shown a steady growth in recent months, however, manufacturers are less optimistic about the near future.
While output, employment and domestic orders were showing signs of improvement in the last quarter, post-Brexit, manufacturers are less optimistic moving forward.
CBI Chief Economist, Rain Newton Smith, said:
“Manufacturers picked up the pace over the second quarter, with output growing solidly. We’re also seeing encouraging signs of a boost to export competitiveness from a weaker sterling.
“But it’s clear that a cloud of uncertainty is hovering over industry, post-Brexit. We see this in weak expectations for new orders, a sharp fall in optimism and a scaling back of investment plans.”
UK Manufacturing PMI
The UK Purchasing Manufacturing PMI was also down to 48.2 for July, with production and consumer orders only experiencing a modest rise, which is thought to be largely due to the uncertainties surrounding the aftermath of the Brexit vote. The figures are the poorest for three years, but export orders received a boost.
Senior Economist, Rob Dobson from Markit, said:
“The final PMI came in at 48.2, down from the earlier flash print of 49.1. The pace of contraction was the fastest since early-2013 amid increasingly widespread reports that business activity has been adversely affected by the EU referendum. The drops in output, new orders and employment were all steeper than flash estimates.”
The demand for manufactured goods in the UK also appear to have been affected both prior to the vote and afterwards, and the PMI figures were also bad news the value of the pound, which fell sharply following the announcement.
Production and employment
The figures highlight concerns over employment figures in the manufacturing sector. Further job losses were recorded in July, and there are worries that the trend is set to continue. Production experienced the worst decline since 2012 and contractions were noted across the consumer, investment and intermediate goods sectors.
Recession fears
The poor performance of manufacturing had been expected following the Brexit vote and the uncertainty surrounding it. However, the PMI results were lower than predicted, and this has led to fresh concerns over a recession.
David Noble, Group Chief Executive Officer from the Chartered Institute of Procurement and Supply stated that without new orders coming through, the downward trajectory in the manufacturing sector is likely to get worse in the short term.