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Confidence stable in manufacturing, despite COVID-19 and Brexit, says EY

Oct 07
Tags: Ernst & Young LLP
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Confidence stable in manufacturing, despite COVID-19 and Brexit...

Manufacturing expansion slowed a little in September when compared to the 30-month high of August, but it still managed to grow for the fourth month in a row. That is the finding of the purchasing managers survey at the end of quarter three.

Looking at the manufacturing purchasing managers’ indexes (PMI) in more detail, there was a drop to 54.1 in September. This came after an initial flash reading of 54.3 and in the wake of 55.2 in August and 53.3 in July.

The survey for September was mainly positive, despite COVID-19 and Brexit looming in the background. Export orders were found to be at a 21-month high, putting new orders as a whole at an elevated level.

Of course, employment has been falling in the manufacturing sector for a while and September was no exception. It became the eighth consecutive month with jobs seeing a decline, but Rishi Sunak’s Jobs Support Scheme could help to turn things around.

While there was evidently a slowdown when compared against August, results from September do support the belief that the economy has rebounded in the third quarter. With GDP contracting by a record 19.8 per cent in quarter two, it was much needed.

The leading UK economic forecasting group, EY Item Club has placed GDP growth at between 13 per cent and 17 per cent for quarter three. It does, however, predict that the fourth quarter is likely to present more of a challenge with limited growth.

As unemployment rises, pent-up demand falls off and further coronavirus restrictions all build, the manufacturing sector is likely to be impacted. Add to this the uncertainties surrounding a future trading relationship with the EU and there’s unlikely to be much appetite for investment in quarter four.

Howard Archer, chief economic advisor to the EY Item Club, said: “Confidence was essentially stable in the manufacturing sector in September, close to July’s 28-month high. Significantly though, Markit revealed that there were also increased numbers of firms noting uncertainty about the future, particularly regarding COVID-19 and Brexit.”

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