Press release

1 May 2020 London, GB

Purchasing managers report manufacturing sector activity contracted at record pace in April due to impact of coronavirus

The purchasing managers reported record contraction in manufacturing activity in April as the sector was severely hampered by the lockdown that came into effect on 23 March to combat coronavirus.

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  • The purchasing managers reported record contraction in manufacturing activity in April as the sector was severely hampered by the lockdown that came into effect on 23 March to combat coronavirus.
  • The underlying manufacturing performance in April was weaker than implied by the record low PMI reading of 32.6 (revised down from the “flash” reading of 32.9 and down from 47.8 in March). This is because there was once again a marked positive contribution to the PMI from a lengthening of supplier delivery times.
  • Output was particularly weak in April falling at a record rate. The weakness was widespread across sectors, except for medical and food-related goods.
  • Other elements of the survey bode ill for manufacturing activity in the near term at least. Most worryingly, new orders contracted at a record rate, while backlogs of work were the lowest since February 2009.
  • The fall in manufacturing jobs reported by the purchasing managers highlights the importance of the Government’s Coronavirus Job Retention Scheme.
  • We expect the economy to contract around 13% quarter-on-quarter in the second quarter on the assumption that there is some lifting of restrictions on activity starting during May. We see GDP contracting 6.8% over 2020.

Howard Archer, chief economic advisor to the EY ITEM Club, comments:

The purchasing managers survey showed manufacturing activity contracting at a record pace in April, as the sector was severely hampered by the lockdown that came into effect on 23 March to combat coronavirus. While the manufacturing sector suffered less than the services sector, the impact on activity was still substantial.

Specifically, the PMI fell back to 32.6 in April (revised down from the “flash” estimate of 32.9) from 47.8 in March and a 10-month high of 51.7 in February.

April’s reading of 32.6 was below the previous record low of 34.5 recorded in February 2009 during the financial crisis. It was substantially below the 50.0 level that indicates flat activity.

It should be noted that the April headline PMI understated the weakness of the manufacturing sector. This is because there was once again a marked positive contribution to the PMI from a record lengthening of supplier delivery times. This is normally seen as reflecting strong demand and a positive – but it has recently been due to the disruption to supply chains stemming from the disruption to manufacturing inputs because of factory shutdowns around the world and shipping delays due to coronavirus.

Output contracted at a record pace in April

Output contracted at a record rate. Lower output in April was attributed to the consequence of coronavirus, most notably plant shutdowns and weak domestic and global demand.

New orders contracted at the sharpest rate in the survey’s history. This was the consequence of reduced domestic and foreign demand. Export orders also fell at a record rate, with widespread weakened demand.

Markit reported that there were record declines in output, new orders and employment across the consumer, intermediate and investment goods sectors. The few companies reporting output or new orders growth were generally producing medical or food goods.

Backlogs of work were the lowest since February 2009. Employment fell at a record rate, with a particularly sharp drop from March. Output prices rose at the slowest rate since May 2016. Input prices only edged up. In addition, confidence rose modestly from the record low seen in March.