UK manufacturing slumps. So is a recession next?
The closely watched IHS Markit/Cips Purchasing Managers Impact tumbled to a seven year low despite car plants reopening from their spring shutdown
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Predictably awful is perhaps the best way to describe the latest manufacturing data from from IHS Markit/CIPS.
Their Purchasing Managers' Index (PMI) fell to 47.4 in August, down from 48 in July. Anything below 50 indicates that the sector is contracting. Similar figures for construction and the UK’s dominant services sector will follow later this week.
To put it in context, these are the worst numbers in seven years.
The assumption in the City was that, with Britain’s car plants having ended the temporary shutdowns imposed ahead of the last no deal Brexit cliff edge in the Spring, there would be a modest improvement. That it hasn’t happened looks ominous.
But, but, but look at Germany, tends to be the stock response of Brexiteers when confronted with figures like this. This is a cynical attempt to deflect attention from the problems they have created and the damage they are doing to the economy.
It is, however, quite true that the figures were also impact by a generally chilly economic climate.The global picture is not a pretty one and it is affecting manufacturers across the Western world including, yes, Germany.
But I would draw your attention to a very good point in response to the figures made by Simon French, the chief economist at broker Panmure Gordon.
He says that while it is true that the 7-year low in UK manufacturing is generally in line with the (weak) global picture, EU and Chinese PMI numbers have started to stabilise in stark contrast to the UK (and the US) which are still trending downwards.
In economics, the trend is just as important as the bare numbers
Which, of course, brings us to back Brexit, and the uncertainty it is wreaking. It inevitably serves to make a shaky global situation worse for British industry and the people who work in it. Behind the numbers are real people with real livelihoods which are under threat. That should not be forgotten.
The next big question is whether we have entered a recession, given that GDP contracted in the last quarter. It takes two of these in a row to tick that particular box
At the moment, it’s a little early to be speculating. It’s worth noting that the PMIs are heavily influenced by sentiment and while they are often a good pointer, the picture they paint isn’t always reflected in the official GDP data.
Manufacturing is also dwarfed by services in the UK. You can expect the PMIs for the latter to be very closely watched.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments