Industrial output rises at slowest pace since the spring

Andrew Cummings
November 4, 2018

Overall, and while falling to an 11-month low, business optimism regarding output over the next 12 months was sustained in October.

"Vietnamese manufacturers allayed fears of a protracted slowdown with strong rises in output, new orders and employment all recorded in October", said Andrew Harker, Associate Director at IHS Markit, which compiled the survey.

Volumes of new work from overseas also rose, albeit at the softest rate for three months.

The PMI for large firms was 51.6 percent, down 0.5 percent on the month, but still 1.4 percent higher than manufacturing PMI, so the steady operations of large firms are the main prop of manufacturing growth.

The manufacturing supplier delivery time index grew faster to 56.4 points, while the sector's inventories index also grew for the nineteenth consecutive month to 56.2 points, the index grew at a faster rate when compared to its level in the previous month.

"However, job creation bucked this downward trend with one of the highest levels of hiring in the last three years and civil engineering experienced a slight reprieve after a few disappointing months". There were modest gains elsewhere: China's Caixin Manufacturing PMI reading nudged higher to 50.1 from 50, moving in the opposite direction from the official manufacturing report released on Wednesday.

The weakness in total new orders was mainly centred on the consumer goods sector. Although the rate of output price inflation accelerated to the fastest since July, it remained well below that seen for input costs. Slower new order growth impacted firms' expectations for future growth, with the business expectations index falling to a near six-year low.

"Manufacturers are at the sharp end of the slowdown in global trade and the increasing reluctance of European customers to source components for Britain, given the risk that supply chains might fail in the event of a no-deal Brexit", says Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics.

Greater production requirements also drove a first monthly rise in input buying since April.

Manufacturers in the United Kingdom have not only stopped hiring, but have also grown "increasingly defensive", with companies looking to protect cash flow and implement wider cost-cutting measures, including a decrease in purchasing activity and lowing inventories, Dobson said.

"That said, market conditions remained challenging for firms and further improvements will be needed in coming months if we are to see a return to growth", said IHS Markit Associate Director Andrew Harker, commenting on the Istanbul Chamber of Industry Turkey Manufacturing PMI survey data. In a clear sign that inflationary pressures are continuing to build, strong customer demand meant firms were often able to push cost increases through to selling prices.

This is the lowest level since December 2014.

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