Press release

3 Oct 2022

Manufacturing PMI extends decline in September – EY ITEM Club comments

September's UK manufacturing PMI supported the flash reading's downbeat assessment of the sector, with output falling in response to declining consumer and business demand, both at home and abroad.

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  • September's UK manufacturing PMI supported the flash reading's downbeat assessment of the sector, with output falling in response to declining consumer and business demand, both at home and abroad. Even though the ‘super deduction’ may offer some support to demand, the manufacturing sector is still likely to face challenges in the near-term.

  • The survey pointed to an acceleration in cost and inflationary pressures, reversing the recent trend. Though the survey will rank relatively low in the priorities of the Monetary Policy Committee, it will strengthen the conviction that a large rate rise is needed in November.

Martin Beck, chief economic advisor to the EY ITEM Club, says: “The manufacturing PMI fell to 47.3 in September from 48.4 in August. Output volumes declined as manufacturers grappled with a fall in new orders linked to both the UK's cost of living crisis and much weaker demand from abroad – export orders fell at the fastest rate since May 2020.  

“Though the impending end of the ‘super deduction’ capital allowance should provide some support to demand for investment goods over the next few months, there's an increasing risk that this will be more than offset by the squeeze on household finances and increasing signs of weakness in the global economy. The EY ITEM Club therefore expects manufacturing activity to continue to contract in the near future. 

“The survey suggested that both price and cost pressures strengthened in September, reversing the recent trend. While the EY ITEM Club doesn't expect the Bank of England to place significant emphasis on the results of this survey, it does emphasise that the energy price guarantee is no panacea, and that inflation is likely to remain high in the short-term. The EY ITEM Club thinks that it is likely that the Monetary Policy Committee will increase interest rates by up to 100bps at its next meeting in November.”