Manufacturing stockpiling hits record high as job losses rise

Manufacturing output in the UK hit a four-month low in February, while stockpiling in the industry hit another record high.

The Markit/CIPS UK manufacturing purchasing managers’ index (PMI) showed a reading of 52.0 last month, lower than a revised reading of 52.6 in January.

The reading matched economists’ expectations, with a figure above 50 indicating growth.

The rate of job losses also grew, hitting a six-year high amid low optimism.

Companies cut back on the number of employees at the steepest rate since February 2013.

Preparations to mitigate the impact of potential Brexit-related disruption were still under way, with growth in stockpiling of input materials hitting a fresh high.

The stocks of purchases balance was 59.1, compared to the previous record high of 56.8 which was reported in January.

Almost 70% of the companies offering a reason behind the build-up of stocks attributed it to Brexit.

Positive sentiment was either at or near record lows across the consumer, intermediate and investment goods sectors.

Rob Dobson, director at IHS Markit, which compiles the
survey, said: “With Brexit day looming, UK manufacturers continued to implement plans to mitigate potential disruptions.

“Stockpiling of both inputs and finished products remained the order of the day, with growth in the former hitting a fresh record high.

“The current elevated degree of uncertainty is also having knock-on effects for business confidence and employment, with optimism at its lowest ebb in the survey’s history and the rate of job losses accelerating to a six-year high.

“Official data confirm that manufacturing is already in recession and the February PMI offers little evidence that any short-lived boost to output from stock-building is sufficient to claw the sector back into growth territory.”

Howard Archer, chief economic adviser at EY ITEM Club, said demand has continued to be impacted by political and economic uncertainty.

“Conditions currently look challenging at home for manufacturers – notably heightened business caution over investment and expenditure on capital goods amid concerns and uncertainties over Brexit and the economy,” he said.

“Fragile consumer confidence is also a constraint on demand for manufactured goods, particularly big ticket items.

“On a positive note, the recent pick-up in consumer purchasing power amid firming earnings growth and slowing inflation is helpful for demand of big-ticket manufactured items.”