S&P: Slump in Manufacturing Production at End of 2023
S&P Global has released data on the downturn in UK manufacturing production, offered explanations for why this only worsened at the end of 2023 and suggested that this experience would help the manufacturing sector in the long-term.
S&P Global reports on manufacturing production
S&P Global’s results showed:
- Manufacturing production declined for the tenth successive month in December 2023.
- Output was scaled back in response to weaker intakes of new business, reduced demand from overseas and efforts to slim stocks down, for both manufacturers and their clients.
- Manufacturers reported that the weak economic backdrop was due to clients delaying orders and poor weather conditions.
- The rate of contraction eased for the fourth month in a row, to its slowest since May 2023.
- December saw average selling prices rise slightly for the second straight month. Where an increase was reported, this was mainly due to efforts to protect margins. This was partly offset by those manufacturers who passed on lower costs to clients.
- In December, business optimism dipped to a 12-month low due to the faltering economy, client closures and high interest rates.
- However, companies still expect production to rise (on average) over the coming 12 months due mainly to sales drives and new product launches.
Potential growth prospects for the manufacturing sector
Dave Atkinson, SME & Mid Corporates head of manufacturing at Lloyds Bank shared his thoughts on the downturn in UK manufacturing production at the end of 2023.
“Manufacturers are entering the new year with a bit of a hangover from the challenges of 2023. Despite this, many of those we speak to tell us they’ve become more agile at dealing with the headwinds posed by high input costs and energy bills,” said Atkinson. “They’re also excited by the potential growth prospects provided by reshoring, new technologies and the green economy, with our latest Business Barometer reporting that the majority of firms expect their activity to increase over the next 12 months, as the sector looks to move onto more robust footing as early as possible in 2024.”
“UK manufacturing output contracted at an increased rate at the end of 2023. The demand backdrop also remains frosty, with new orders sinking further as conditions remain tough in both the domestic market and in key export markets, notably the EU. The downturn has hit manufacturers' confidence, which dipped to its lowest level in a year and encouraged renewed cost caution with further cutbacks to stock levels, purchasing and employment,” said Rob Dobson, Director at S&P Global Market Intelligence. "With concerns about high interest rates and the cost-of-living crisis hurting demand, the outlook for manufacturers in the months ahead remains decidedly gloomy.”
Yet Dobson stated that the slump was creating some positive outcomes for the sector.
"The downturn in demand is having some positive effects on supply chains, however, with suppliers reducing their prices for raw materials and vendor lead times showing a further improvement.”
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