October 4, 2022

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Cautious consumers dragging factory output to a new low

2 min read

Falling production in the UK’s consumer goods industry dragged down output in the manufacturing sector to a seven-month low in May amid broader signs of a global economic slowdown.

Growth in Britain’s factory sector slowed last month, according to a closely watched survey, driven by global supply chain disruption, high inflation and falling new orders. An index of purchasing managers fell from 55.8 in April to 54.6 in May, in line with economist forecasts and above the 50-mark that separates growth from contraction, according to S&P and CIPS, which carries out the surveys.

Rob Dobson, director at S&P Global Market Intelligence, said manufacturing companies, which make up just under a fifth of the UK economy, were facing a “barrage of headwinds”.

“Factories are reporting a slowdown in domestic demand, falling exports, shortages of inputs and staff, rising cost pressures and heightened concern about the outlook given geopolitical uncertainties. The consumer goods sector was especially hard hit, as household demand slumped in response to the ongoing cost-of-living crisis,” Dobson said.

“Forward-looking indicators from the survey suggest that a further slowdown may be in the offing. Business optimism dipped to a 17-month low and weaker demand growth led to surplus production, meaning warehouse stock levels are rising.”

The global manufacturing sector has been hit by renewed Covid-19 lockdowns in China’s big cities hitting supply chains, and rising inflation caused by surging energy prices following the war in Ukraine. Just under half of all UK businesses reported that the prices of materials, goods or services rose between April and March, according to the Office for National Statistics.

High inflation has led to consumers switching their spending from more expensive goods to services such as tourism or leisure after lockdown restrictions were lifted, trends that have been reported in the UK and Europe.

Activity in the eurozone’s manufacturing…

Business Matters

2022-06-02 04:40:44

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