The UK manufacturing sector contracted in February, with output and new orders down on the prior month, according to a survey released today.
The latest Purchasing Managers’ Index, compiled by the Chartered Institute of Purchasing & Supply (CIPS) and financial information services firm Markit, also reveals that employment in the industry decreased and purchasing activity was slashed as manufacturers continued to show a preference for holding less stock.
Seasonally adjusted figures put the Markit/CIPS Purchasing Managers’ Index (PMI) below the neutral 50.0 mark for February, to stand at 47.9. This is a decrease from a downwardly revised 50.5 in January and is the first sub-par reading since November 2012.
The authors of the monthly report said that the manufacturing sector had lost considerable momentum during February.
Chris Williamson, chief economist at Markit, commented that the contraction “represents a major set-back to hopes that the UK economy can return to growth in the first quarter and may avoid a triple-dip recession.”
The UK economy shrank by 0.3% in the last three months of 2012. If there is a further decline in GDP over the first three months of 2013 the country would officially be in its third recession in five years.
A closer look at the February figures shows that new orders dropped for the second month in a row, and at a faster pace than in January. Firms blamed tough market conditions both in the domestic market and overseas. As a consequence, manufacturers shed staff at the fastest rate seen for more than three years, with the deepest cuts in the workforce made by larger companies.
The dire situation for those exporting their goods is illustrated by the fact that new export orders declined for the 14th successive month, although things may improve in the coming months as the weaker pound is expected to help British exporters.
Reflecting on the overall picture, Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said that the PMI figures offer a disappointing indication of activity in February and underline the challenges the industry is facing, with soft domestic markets compounded by flagging demand from abroad.