Manufacturing output slumps as Covid-19 lockdown weighs

The UK manufacturing sector continued to struggle in May, a widely-watched survey showed on Monday, although the pace of decline eased following April's historic fall.

The IHS Markit CIPS UK purchasing managers’ index was 40.7 in May, up from the historic low of 32.6 in April and a marginal improvement on the flash reading of 40.6. However, the reading just missed consensus expectations of 40.8 and remains well below the key 50.0 mark that separates contraction from expansion.

It was also the seventh lowest reading in the survey’s history as lockdown measures, company shutdowns and social distancing weighed heavily on the manufacturing sector. Output, new orders and employed all contracted sharply, the survey found.

Where there was growth, it was generally restricted to healthcare and personal protective equipment products.

Rob Dobson, director at IHS Markit, said: "The rate of contraction has eased considerably since April, meaning - absent to a resurgence of infections - the worst of the production downturn may be behind us.

"However, changes to working practices, uncertainty about how long the Covid-19 restrictions may be in place, weak demand and Brexit worries all suggest the UK is set for a drawn-out economic recovery. This will make the ‘new normal’ one of the toughest recovery environments many manufacturers will ever have to face."

Duncan Brook, group director at the Chartered Institute of Procurement and Supply, said: "Though less severe than the wrecking losses of last month, continued supply chain disruption resulted in another strong contraction, as output fell at its fourth-fastest rate in the near 30-year survey history.

"With new orders from home and abroad drying up for the third month in a row, company owners watched helplessly as factory shutdowns, raw material shortages and furloughed staffed continued to eat away at their operations. With no new pipeline of work to fulfil, purchasing dropped at one of the fastest rates for three decades."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, conceded the sector was still "a long way from normal" but argued it was moving in the right direction.

"Other indicators, such as daily energy consumption and daily heavy goods vehicle mileage, suggest that the production and transportation of manufactured goods rose steadily over the course of May, albeit from greatly depressed levels in April," he said.

"As a result we are still pencilling in a 4% month-to-month increase in manufacturing output in May, following an assumed 15% decline in April."

The survey was sent to a panel of around 600 manufacturers, with questionnaires collected between 12 and 26 May.