Manufacturing slump stokes recession fears

MANUFACTURERS across Britain and europe suffered another month of decline as demand wanes and costs soar.

As fears over a global recession mounted, financial information group S&P Global said factory output in the UK fell for a third month in a row in September.

At the same time, the downturn in the eurozone deepened, with factories in Germany and France enduring their worst months since the first wave of the Covid-19 pandemic in early 2020.

Chris Williamson, chief business economist at S&P Global, said: ‘The ugly combination of a manufacturing sector in recession and rising inflationary pressures will add further to concerns about the outlook for the eurozone economy.’

S&P Global said its manufacturing index for the UK – where scores below 50 show decline – hit 48.4 in September.

While that was stronger than the 47.3 registered in August, it was the third month of contraction in a row.

The report said factories ‘cut back production in response to declining new order intakes’ with exports hit by lower demand from the US, China and the eU. Manufacturers also saw their costs rise – and put up prices at the factory gate in response.

John Glen, chief economist at the Chartered Institute of Procurement and Supply, which compiled the report with S&P Global, said: ‘Manufacturing businesses continued to feel an autumnal chill in September as declining sales, higher costs and a depressed marketplace pulled the sector down into contraction for a third month in a row.’

The eurozone manufacturing index also came in at 48.4, its worst performance for 27 months. France and Germany clocked up the weakest scores, at 47.7 and 47.8 respectively, while Ireland was the only eurozone country in the report to see growth. The report fuelled fears of a bleak winter for the British and eurozone economies as central banks raise interest rates to combat runaway inflation.

Williamson said: ‘excluding the initial pandemic lockdowns, eurozone manufacturers have not seen a collapse of demand and production on this scale since the height of the global financial crisis in early-2009. The downturn is being driven primarily by the surging cost of living, which is reducing spending power and hitting demand, but soaring energy prices are also increasingly limiting production.

‘Worse looks set to come, with orders slumping at a significantly steeper rate than production is being cut. Further steep production cuts look to be on the cards in the coming months unless demand revives.’

‘Worse looks set to come’