UK recession WARNING for manufacturing sector after WEAK data: ‘Distinct possibility’ | City & Business | Finance



The Markit-CIPS UK manufacturing purchasing managers’ index (PMI) showed a reading of 52.8 last month, lower than the 54.2 recorded in December. It represents a three-month low and the second weakest reading since July 2016, the month after Britain voted to quit the EU. While a figure above 50 indicates growth, economists were expecting a reading of 53.5. Stephen Cooper, Head of Industrial Manufacturing at KPMG, said the gloomy data “does not paint a rosy picture” as he described the risk of UK manufacturing slipping into recession as a “distinct possibility”. He said: “when taken with poor results from Europe – the big four countries in negative territory, macroeconomic issues and a downturn in activity in China, these factors suggest that a slip into recession for UK manufacturing is a distinct possibility.

“With this and the continuing Brexit saga, we continue to encourage manufacturers to take positive steps to understand their supply chains, mitigate risks and ensure, to the best of their ability, that financing is available in case conditions deteriorate further.”

The data also revealed manufacturers are stockpiling goods at the fastest rate since records began as they brace for the possibility of Britain leaving the European Union with no deal.

It showed stock-building increased at the sharpest pace in the survey’s 27-year history last month.

Rob Dobson, director at IHS Markit, which compiles the survey, said: “The start of 2019 saw UK manufacturers continue their preparations for Brexit.

“Stocks of inputs increased at the sharpest pace in the 27-year history, as buying activity was stepped up to mitigate against potential supply-chain disruptions in coming months.

“There were also signs that inventories of finished goods were being bolstered to ensure warehouses are well stocked to meet ongoing contractual obligations.

“Despite the temporary boost provided by clients’ pre-purchases and efforts to build-up stocks, the underlying trends in output and new orders remained lacklustre at best.

“Growth of new order inflows slowed sharply, and new export orders were near-stagnant, contributing to the weakest trend in output since the month following the EU referendum.”

The pound dropped following the bleak data release.

Reacting to the data release, as of 12.00PM UK time the pound is trading at €1.1386, down half a percent from opening levels of €1.1452.

Against the US dollar, Sterling was at $1.3055 after dropping from the open of $1.3109.


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