Manufacturing sector buckles in the face of strengthening headwinds - ITEM Club

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s PMI manufacturing figures:

  • The manufacturing sector is buckling in the face of strengthening headwinds
  • There is no good news in today’s figures, with all indicators pointing to underlying weakness in the sector
  • Q4 growth prospects have darkened further

“The manufacturing sector is buckling in the face of strengthening headwinds. Demand, both from home and abroad, has been weak for a few months now and there is little sign of any immediate improvement. It is no surprise therefore that the headline index for PMI manufacturing has fallen further.

“It is difficult to find any good news in today’s figures. With the orders pipeline drying up rapidly, manufacturers are likely to continue struggling in the coming months and it is likely to be well into next year before the sector enjoys any sort of pick-up. Meanwhile, all other indicators - such as a fall in production, contraction in employment and decline in backlogs of work - point to underlying weakness in the sector.

“Today’s announcement further darkens the prospects for growth in Q4. Even in the best-case scenario, we expect GDP to remain flat but there is a good chance that GDP will fall in Q4. The longer the crisis in the Eurozone remains unresolved, the higher the probability that the UK will see a full-blown recession.”

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