PMI slumps below 50 again as eurozone crisis bites

The authoritative Purchasing Managers' Index (PMI) from the Chartered Institute for Purchasing and Supply (CIPS) hit a near two-and-a-half year low in November, indicating an accelerating downturn in output leading to further job losses. For the second successive month, companies cut back production in response to lower demand from both domestic and export clients while the number of workers on the payroll reduced at the fastest pace for over two years. The PMI fell to 47.6 in November (below the neutral score of 50.0 that merely indicates stagnation), its lowest level since June 2009. PMI has now resistered below 50 in two successive months. Rob Dobson, senior economist at Markit and author of the Manufacturing PMI said the manufacturing engine had run out of steam. "The lack of new work is forcing manufacturers to rely on previously-placed orders to avoid sharper cutbacks in output and employment. This cannot go on indefinitely, and job losses will inevitably mount if order books continue to weaken," he went on. CIPS CEO David Noble (pictured) predicted a bleak winter for UK manufacturers and the likelihood of more job losses to come next year. He added: "Thailand's worst flooding in 50 years put extra pressure on UK manufacturers this month as supply-chain lead times lengthened significantly. This highlights the complex web many manufacturers operate in; even if just one of the thousands of parts that go into building a car or a computer is missing then the whole system is disrupted." At Barclays, head of manufacturing Mark Lee commented: "This lack of confidence and the situation in Europe is now so entwined that despite some positive news for UK industry in the Chancellor's Statement this week it is difficult to see the mood amongst manufacturers budging much. Until we see major contracts awarded to UK companies and new infrastructure projects underway, this is unlikely to change." EEF chief economist Lee Hopley, said there weren't any encouraging number, suggesting more than a mere slowing in activity. "The main drag now appears to be on confidence across manufacturing as the economy is being buffeted by increasingly negative news and growing uncertainty in major markets," she commented.