CIPS/Markit UK Manufacturing PMI

Manufacturing output, new orders and employment all fell at survey record rates in September

Key points:

       Manufacturing PMI slumped to series record low in September

       New orders, production and employment all down sharply

       Weakness centred on the consumer and intermediate goods sectors


Latest PMI data indicated that UK manufacturers are currently facing the toughest operating conditions in the seventeen-year survey history. The headline seasonally adjusted Purchasing Managers Index (PMI) fell sharply to a record low of 41.0 in September, as levels of output, new orders and employment all contracted at the fastest rates in the series history.

Companies were especially hard hit by the ongoing weakness of domestic demand, as the downturns in the credit, housing and construction markets led to further reports of clients cancelling or postponing orders. Conditions were also weak in foreign markets, as new export business fell at the fastest rate for seven years. Lower demand from overseas clients was mainly attributed to the ensuing slowdown of the global economy.

The downturn was most severe in the consumer goods sector in September, where output and new orders both fell at series record rates. New work received also contracted at a record pace in the intermediate goods sector, which led to production being scaled back at the second-greatest extent recorded by the survey-to-date. Output rose slightly at capital goods producers, despite a further sharp decline in new orders.

September data indicated that the current weakness of the manufacturing sector was having negative effects on the labour market and suppliers. Staffing levels fell for the fifth month running as the Employment Index posted a reading of 40.1 reflecting widespread lay-offs, the non-replacement of leavers and the postponement of planned company expansions.

Meanwhile, input buying volumes fell at the fastest rate in the survey history. The seasonally adjusted Quantity of Purchases Index recorded a reading of 35.2 as companies aligned their purchasing and holdings of input inventory to reflect lower production requirements.

Prices data provided some relief for manufacturers in September. The seasonally adjusted Input Prices Index came in at 73.7, down sharply from 78.1 in August, as input cost inflation eased to a seven-month low, as recent falls in the prices of oil and other commodities continued to filter through to companies. However, the rate of increase in purchase prices remained high and above the survey average. 

Average charge inflation eased for the first time in 2008-to-date during September, although the rate of increase was still the joint third-fastest in the series history.

The seasonally adjusted Backlogs of Work Index fell to a new series low as it has in each of the past four months recording a reading of 37.3. The sharp downturn in new work received freed up capacity to complete work on existing contracts.


Roy Ayliffe, Director of Professional Practice at the Chartered Institute of Purchasing and Supply, said:

Given the unprecedented chaos in global economies, there was little respite for UK manufacturers in September as the sector suffered the worst operating conditions so far recorded in the surveys seventeen-year history. 

Purchasing managers saw levels of output and new work tumble as firms were hit by weakening domestic and foreign demand. In turn, jobs were axed for the fifth month running in an effort to downsize and cut costs.

One hopeful area for the MPC however was the slowing of inflation. Input cost inflation eased to a seven month low as September saw the price of oil and other key commodities fall slightly.

Rob Dobson, Senior Economist at Markit Economics, said: 

The retrenchment of the UK manufacturing sector in September was much sharper than anticipated. The headline PMI and indexes for output, new orders and employment all sank to survey record lows, partly reflecting the ongoing freeze in the credit and housing markets. Domestic demand in particular has deteriorated considerably since the turn of the year, with new orders from the consumer, B2B and investment sectors all down sharply. The MPC is likely to look for further appropriate opportunities to support the economy and shore up confidence. However, the recent detachment between central rates and LIBOR on which most business borrowing is set suggest an immediate cut in the central rate alone will not be sufficiently effective.

The October Report on Manufacturing will be published on Monday 3 November 2008



The CIPS/Markit UK Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 600 industrial companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on the regional, and industry contribution to GDP.

Survey responses reflect the change, if any, in the current month compared to the previous month based on data collected mid-month. For each of the indicators the Report' shows the percentage reporting each response, the net difference between the number of higher/better responses and lower/worse responses, and the diffusion' index. This index is the sum of the positive responses plus a half of those responding the same'.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change. An index reading above 50 indicates an overall increase in that variable, below 50 an overall decrease.

The CIPS/Markit UK Manufacturing Purchasing Managers' Index (PMI) is a composite index based on five of the individual indexes with the following weights: New Orders - 0.3, Output - 0.25, Employment - 0.2, Suppliers' Delivery Times - 0.15, Stock of Items Purchased - 0.1, with the Delivery Times Index inverted so that it moves in a comparable direction.

The Purchasing Managers Index (PMI) survey methodology has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries (including the European Central Bank) use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.


About CIPS

The Chartered Institute of Purchasing & Supply (CIPS) is the leading international body representing purchasing and supply management professionals. It is the world-wide centre of excellence on purchasing and supply management issues. CIPS has over 49,000 members in 150 different countries, including senior business people, high-ranking civil servants and leading academics. The activities of purchasing and supply chain professionals can have a major impact on the profitability and efficiency of all types of organisation.

About Markit

Markit is a financial information services company with more than 1,000 employees in Europe, North America and Asia. Over 1,000 financial institutions use our independent services to manage risk, improve operational efficiency and meet regulatory requirements.

About Markit Economics

Markit Economics is a specialist compiler of business surveys and economic indices, including the Purchasing Managers' Index (PMI) series, which is now available for 26 countries and key regions including the Eurozone and BRIC. The PMIs have become the most closely watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends.

The intellectual property rights to the UK Manufacturing PMI provided herein is owned by Markit Group Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markits prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (data) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Markit, PMI and Purchasing Managers' Index are all trademarks owned by The Markit Group.

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