Final data published by S&P Global/CIPS showed that business activity in the UK manufacturing sector declined sharply in October, moving into contraction territory for the first time since April. The new orders and stocks of purchases components (both of which signaled solid contractions) weighed heaviest on the PMI.
UK manufacturing PMI fell to 49.9 points from 51.5 points in September. Economists had expected a decline to 50.3 points. An index reading below 50 points indicates a contraction in activity in the sector.
The report also showed that manufacturing output rose for the sixth consecutive month in October, but the growth rate slowed to a 6-month low. Output growth was registered in the consumer and investment goods sector, offsetting a marked cutback in production volumes in the intermediate goods category. Meanwhile, new orders declined for the first time since April amid a lack of market confidence, economic slowdown and customer caution ahead of the announcement of the UK budget. New export orders also fell in October amid reports of lower intakes from clients in Europe, China and the US. Employment in the manufacturing sector increased in October, but only slightly, as many firms remained cautious about incurring additional costs. The data also showed that business optimism improved slightly in October, with the majority of companies (52%) still expecting production growth next year, compared with just 8% predicting a reduction. As for the inflationary situation, the rate of increase in input costs slowed sharply to its weakest in the current ten-month sequence of inflation, while average selling prices rose for the twelfth consecutive month, but the rate of increase eased to its lowest since February.