The UK manufacturing sector weakened noticeably in August on fears of a no-deal Brexit according to the latest survey by manufacturers’ umbrella federation, Make UK. The gradual erosion in the total balance of orders placed in the sector has eroded sharply since the first quarter of 2019. Make UK considers that this indicator could turn from positive to negative in Q4, it says in a note sent to Kallanish.
All survey indicators weakened significantly, the survey shows, while domestic orders turned negative. Export orders were also down despite prices having fallen showing that the cheaper pound sterling is of no benefit, the federation says.
“According to the survey, the total order balance, whilst still just in positive territory, fell to +2% in Q3 (down from +8% in Q2 and +16% in Q1) indicating the significant rate of weakening which has taken place since the start of the year. At current trend, according to Make UK this will almost certainly turn negative in the final quarter of the year barring a remarkable turnaround in the economy,” Make UK adds.
There is also no evidence that stockpiling of goods has begun ahead of a ‘no-deal’ Brexit. Investment intentions have also turned negative for the first time since the EU referendum. The manufacturing forecast has therefore been cut to just 0.1% in 2019 and 0.2% in 2020, Make UK confirms.
The survey results reflect those found in the IHS Markit/Chartered Institute of Purchasing and Supply survey released earlier. At 47.4 in August, down from 48.0 in July, the headline seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to its lowest level since July 2012. The downward movement in the headline index was centred on an accelerated contraction in new work, which decreased to the greatest extent in 85 months.