UK manufacturing sector contracts in October

UK manufacturing activity contracted in October ahead of the Budget, according to a survey released on Friday.

The seasonally adjusted S&P Global purchasing managers' index for the sector fell to 49.9 from 51.5 in September. This was below the flash estimate of 50.3 and marked the first time the PMI has fallen below the neutral 50.0 mark that separates contraction from expansion since April.

The survey found that a lack of market optimism, slower economic growth, stretched supply chains and concerns about the potential impact of the Budget led to reduced intakes of new work and a near-stalling of output growth.

Rob Dobson, director at S&P Global Market Intelligence, said: "UK manufacturing started the final quarter of the year on an uncertain footing amid speculation on government policies ahead of the Budget, which was widely reported to have led to a wait-and-see approach on investment and spending. This domestic headwind, combined with an ongoing loss of export business, led to the first outright contraction in new work intakes since April. Output growth came close to stalling as a result.

"The generally lacklustre environment was also reflected in the headline PMI slipping below its neutral 50.0 mark and business optimism hovering only slightly above September's nine-month low.

"There was better news on the price front. Input cost inflation fell to a ten-month low, easing to one of the greatest extents in the 33-year survey history. Selling price inflation also moderated. This may provide some headroom for policy makers to support growth if demand weakens.

"The November PMI will be especially keenly anticipated to see the near-term impact of the Budget on business conditions and in particular the effect on confidence."