British manufacturing just shrunk for the first time in 3 years
Markit's purchasing managers' index (PMI) for the UK manufacturing sector in April dropped on Tuesday morning, coming in at 49.2. That was lower than the 51.2 expected and substantially down from March's 51 figure.
The purchasing managers' index figures from Markit are given as a number between 0 and 100. Anything above 50 signals growth, while anything below means a contraction in activity - so the higher the better.
Here's what Markit says in its release alongside the data: "April saw the seasonally adjusted Markit/CIPS Purchasing Managers' Index fall below the critical no-change mark of 50.0 for the first time since March 2013. At 49.2, from a downwardly revised reading of 50.7 in March, the headline index was dragged lower by lacklustre trends in production and new orders and declines in both employment and stocks of purchases."
And here's the chart to show just how bad things are:
Recent fears over a stall in the UK's manufacturing sector have now become a reality and driven the steepest decline in the manufacturing PMI for three years. An atmosphere of deep unease is building throughout the manufacturing supply chain, eating away at new orders, reducing British exports and putting more jobs at risk.
A sense of apprehension across the sector is being caused by enduring volatility in the oil and gas industry, falling retailer confidence and the uncertainty created by the EU referendum. In a month that saw the collapse of BHS, the troubles in the British High Street are being felt just as keenly in Britain's factories. Manufacturers are compensating for stalling new order growth by depleting their stocks, and dramatically cutting the amount of raw materials they buy from suppliers.
Things aren't going to get any better soon either Markit says. Here's Rob Dobson, one of Markit's senior economists (emphasis ours):
Manufacturers are emphasising slower domestic demand growth and declining new export orders as the key weaknesses they are facing, amid rising uncertainty about the global economy, the oil & gas industry, retail sector and the EU referendum. With this backdrop unlikely to change in the coming months, the second quarter is likely to remain a bleak landscape for industry.