Two separate snapshots of industrial activity showed a fall in manufacturing activity – part of a pan-European trend exacerbated by the economic fallout from the war in Ukraine. The monthly PMI from S&P/Cips found manufacturing output at the weakest level since the early stages of the pandemic in spring 2020. Apart from the drop suffered during the Covid lockdown, the fall from 48.9 to 42.4 between July and August was the fastest since the global financial crisis in 2009. A reading below 50 indicates contraction, not expansion. Modest growth in the UK’s much larger services sector kept the overall measure of private sector activity from falling below 50, but the fall from 52.1 to 50.9 left the composite index at its lowest level in 18 months . The overall Eurozone PMI fell from 49.9 to 49.2 in August, also the lowest in 18 months. Subscribe to Business Today Get ready for the business day – we’ll point you to all the business news and analysis you need every morning Privacy Notice: Newsletters may contain information about charities, online advertising and content sponsored by external parties. For more information, see our Privacy Policy. We use Google reCaptcha to protect our website and Google’s Privacy Policy and Terms of Service apply. Annabel Fiddes, chief financial officer at S&P Global Market Intelligence, said: “The UK private sector came close to stagnating in August, as a mild increase in activity in the services sector barely offset the deepening recession in manufacturers. “Falling customer demand amid a weaker economic outlook and shortages in both staff and inputs were reported to have hit goods producers hard, with companies recording the fastest declines in output and new work since May 2020. Excluding the initial phase of the pandemic In early 2020, the decline in manufacturing output was the fastest seen since early 2009. Meanwhile, the services sector recorded the weakest growth in activity since the recovery began in early 2021”. The CBI survey of industrial trends showed that over the past three months manufacturers’ order books shrank and output fell for the first time since February 2021. The employers’ lobby group said the mood in the industry had turned gloomier in recent months amid expectations that there would be no recovery in output in the coming months. Alpesh Paleja, CBI economist, said: “From rising prices to bottlenecks in supply chains, manufacturers continue to operate in a context of high input costs and significant operational delays. When combined with an impending economic downturn, it’s no surprise to see orders and activity decline as we move through the year.” As well as rising energy bills, manufacturers are also bracing for further interest rate hikes from the Bank of England. The City expects the official borrowing cost, currently 1.75%, to reach 4% by next spring.
