UK PMI manufacturing dropped to 49.4 in May, down from 53.1 and missed expectation of 52.2. That’s also the lowest level in 34 months. Markit noted that manufacturers reported increased difficulties in convincing clients to commit to new contracts during May, due to high level of inventories from pre-Brexit stockpiling. New order inflows also deteriorated from both domestic and overseas sources.
Rob Dobson, Director at IHS Markit, which compiles the survey:
“The UK manufacturing sector was buffeted by ongoing Brexit uncertainty again in May. The headline PMI posted 49.4, moving back into contraction territory for the first time since July 2016, the month directly following the EU referendum result. The trend in output weakened and, based on its relationship with official ONS data, is pointing to a renewed downturn of production
“New order inflows declined from both domestic and overseas markets, as already high stock levels at manufacturers and their clients led to difficulties in sustaining output levels and getting agreement on new contracts. Demand was also impacted by ongoing global trade tensions, as well as by companies starting to unwind inventories built up in advance of the original Brexit date. Some EU-based clients were also reported to have shifted supply chains away from the UK.
“Although the consumer goods sector remained a positive growth spot, the intermediate and investment goods industries are still comparatively weak, in part reflecting the reverberation of the recent sharp slowdown the autos sector. With these demand, purchasing and inventory trends likely to stay in play for the foreseeable future, the current manufacturing downturn may have further to run and will have negative ramifications for growth in the broader economy in the months ahead.”
