Avoiding the contractions

The UK manufacturing economy stagnated in November but contraction has been avoided as output and orders see growth.

The CIPS/Reuters Purchasing Managers’ Index – a composite indicator designed to provide an overall view of conditions in the manufacturing economy -fell slightly from the previous month’s level, but continued to suggest that the manufacturing economy as a whole had once again avoided contraction.

Although the headline index recorded its lowest level for four months (against a general background of sustained marginal month-on-month growth), it refused to fall below the critical no change mark in November, posting a level of exactly 50.0, compared to 50.6 in October.

Therefore, July continues to be the only month in the past nine when the PMI has signalled outright contraction of the UK manufacturing economy.

Nevertheless, the PMI was down from the previous month and, overall, the manufacturing economy did stagnate. Underlying the stagnation recorded inNovember was a sharp easing in the rate of growth of output. Moreover, this slowdown was part of a recent trend which has seen manufacturing production rise more slowly in each of the past three months. Weaker growth of output was suggested by a number of firms to have reflected long-standing efforts to eliminate spare capacity and use resources more efficiently.

With the sustained weakness in global markets (especially for manufactured goods), firms have been forced to implement measures to cut costs at their units in order to protect margins and keep operations at viable levels, according to the report.