Sharp downturn in UK manufacturing continues in May

According to the report from IHS Markit/CIPS, the rapid downturn in the UK manufacturing sector continued during May, as the public lockdowns, company shutdowns and social distancing measures mandated to combat the spread of coronavirus disease 2019 (COVID19) caused further disruption. Output, new orders and employment contracted at some of the fastest rates during the 28 year survey history, albeit less sharply than the records set in April.

The seasonally adjusted PMI rose to 40.7 in May, up from a record low of 32.6 in April. Despite the increased level of the PMI, it still signalled a marked deterioration in overall operating conditions. The headline index is at its seventh-lowest level ever and at depths unseen outside of the current pandemic and the global financial crisis of 2008-09. May 2020 survey data were collected between 12-26 May.

The impacts of the COVID-19 pandemic were felt across the manufacturing sector in May. Rates of contraction in output, new orders and new export business were among the steepest in the survey history across consumer, intermediate and investment goods producers alike. That said, rates of decline eased from the survey records of the prior month.

Manufacturing employment fell for the fourth successive month in May, as the economic consequences of the COVID-19 pandemic led companies to reduce staff headcounts. Although easing since April, the rate of decline was still the second-sharpest on record.

The ongoing pandemic and uncertainty about the path ahead continued to weigh on business sentiment in May. Although rising to a three-month high, confidence remained downbeat by the historical standards of the survey. Companies still expect to see output rise during the next 12 months, however, forecasting that market conditions would recover some lost ground as lockdowns ease and clients reopen.