"The combination of destocking, deteriorating order books and drop in business optimism will add to concerns that growth risks are shifting to the downside rather than being "broadly balanced", as indicated by the European Central Bank".
United Kingdom manufacturing slowed in October, as output declined to its lowest level in over two years, prompting companies to cut jobs in response to Brexit uncertainty and growing trade tensions, according to the Purchasing Managers Index (PMI) report by IHS Markit/CIPS.
But the factory output index of 52.6 was the lowest reading since July last year, while the imports index of 51.1 was the lowest since February last year.
It said input price inflation quickened to the fastest in nearly a year, and in line with higher purchasing costs, buying activity declined for the first time since July.
Housebuilding and commercial construction both increased at solid rates in October, albeit the weakest in seven and five months respectively. Some firms mentioned intense competition in the market, and delayed final decisions from clients.
The GDP of Yunnan, Guizhou, Jiangxi, Shaanxi, Fujian, Anhui and Sichuan grew most rapidly in the first three quarters, with all of them achieving a growth rate of over 8 percent. Alongside muted new project intakes, firms highlighted uncertainty related to Brexit and the economy as undermining confidence. This means the manufacturing sector is growing more slowly, as Zhao Qinghe, a senior statistician from NBS' Service Survey Center, interpreted the PMI data. The overall volume of inputs purchased continued to rise in October, but at the slowest rate in seven months.
Although firms were generally optimistic that output would increase over the next year, sentiment dipped to an 11-month low amid concerns over current subdued market conditions and the impact of the ongoing China-US trade dispute.
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Intense supply chain pressures continued in October, as signalled by another sharp lengthening of lead times for the delivery of materials from vendors. The employment subindex also inched up despite remaining in negative territory, just off September's 14-month low.
CIPS said staffing levels rose last month at small and medium-sized manufacturers, but fell for the third straight month at large companies in the sector.
Amid reports of higher prices for chemicals, energy and metals, average cost burdens increased further.
"The manufacturing sector saw a strong start to the closing quarter of 2018, with new order inflows rising sharply and business optimism spiking higher in an encouraging sign that firms expect the good times to continue into 2019".
The report's key metric, the PMI, fell 2.1% to 57.7 3 (a reading of 50 or higher indicates growth), with this index showing growth for the 26th consecutive month and the overall economy now having grown for 114 consecutive months.
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