Manufacturing fall is ‘blip’ not reversal insist commentators
6 May 2024
A disappointing fall in the latest CIPS UK Manufacturing Purchasing Managers’ Index should not be taken as an indication of a prolonged pattern, says RSM UK’s national head of manufacturing.
Mike Thornton described the small reduction from the first quarter of the year as “a slight monthly blip”, insisting the sector was in a much better position than the previous year.
The latest quarterly report from April saw the index drop to 49.1. This followed an encouraging first quarter that saw the index top 50 – its highest level in 20 months.
Pointing out that the sector had been in contraction for most of 2023, Thornton added:
“While manufacturers are operating in a less volatile economy, input prices are starting to rise again, measured at 54.8 in April, the highest level since February 2023. As an energy intensive industry, the worldwide squeeze on energy supplies due to the war in Ukraine and conflict in the Middle East will add further cost demands. Similarly, the 10% increase in national minimum wage will also have impacted businesses.
“Against these pressures, it was reassuring to observe an uptick in output prices to 53.1, suggesting that manufacturers have almost immediately passed these increases to customers.”
Thornton’s colleague, RSM UK economist Tom Pugh reiterated the description of the drop as probably a blip in an otherwise upward trend. But he warned it was a reminder of the fragility of economic recovery.
“The economy is only just emerging from recession and although inflation will be back at the 2% target soon, volatility in energy prices and strong growth in labour costs are good reminders that we aren’t out of the woods yet. However, there are good reasons to expect spending on goods to improve over the next year,” he stated.
