UK factory activity shrinks in April but cost pressures ease -PMI - Reuters

LONDON, May 2 (Reuters) - British factory output and new orders contracted at the start of the second quarter of 2023, but manufacturers were more optimistic and input costs rose at the weakest rate since May 2020, an industry survey showed on Tuesday.

The final S&P Global/CIPS UK manufacturing Purchasing Managers' Index (PMI) fell to a three-month low of 47.8 in April from 47.9 in March, still below the 50 threshold for growth though higher than the provisional, "flash" reading of 46.6.

"Output and new orders contracted, as manufacturers felt the impacts of client uncertainty, destocking and tightening cost controls," Rob Dobson, director at S&P Global Market Intelligence.

Britain's economy has been the slowest to recover among the Group of Seven rich nations from the hit caused by the COVID-19 pandemic, but it has so far defied forecasts that it would slip back into a recession.

While manufacturing initially surged after the pandemic lockdowns, partly due to a build-up in backlogs of work, activity has since cooled.

Official figures for February showed that manufacturing output was 0.1% lower than three years earlier, just before the start of the COVID-19 pandemic.

S&P Global said its gauge of future production hit the highest since February last year, with 61% of factories expecting output to rise in the coming year.

"Demand will need to pick up in the months ahead to warrant any increase in production, and with the UK seeing stubbornly high domestic inflation coupled with a worsening export trend, risks seem skewed to the downside," Dobson said.

There were signs that the worst of the inflation surge had passed and pressures on supply chains eased.

The PMI's measure of input price rises fell to the lowest level since May 2020 and is now well below its average in the decade before the pandemic.

Total new orders fell at the fastest pace in three months in April after rising for the first time in 10 months in March.

The decline in overseas demand for British goods also gathered pace, contracting for the 15th month in a row.

Reporting by Suban Abdulla; Editing by Hugh Lawson

Our Standards: The Thomson Reuters Trust Principles.

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