The latest PMI saw UK manufacturing hit a 25-month low of 52.8 in August, with foreign demand reportedly decreasing for the first time since 2016. Tales of a further slowdown in UK manufacturing seem to be rife at the moment with much of the national and trade press covering the release of the latest purchasing managers’ index (PMI) this week.
The PMI posted 52.8 in August – down from 53.8 in July. According to the index compilers (HIS Markit and CIPS), manufacturing production rose at the slowest pace in 17 months, new export orders flatlined and the pace of job creation ‘eased to near-stagnation’. Any score over 50.0 signifies growth and the PMI has shown growth for 25 successive months – although the latest reading is the lowest registered during that period. But is too much emphasis being placed on the PMI? Does it accurately reflect the reality of what’s happening in UK industry? It is one of the few industrial indices to achieve mainstream media exposure, yet it is based solely on questionnaire responses submitted by purchasing managers at 600 industrial companies representing just 0.5% of the total market.
Second, and arguably of more importance, the results are drawn from opinion – a metric which can vary wildly from day-to-day depending on a whole host of external factors people may have no insight into. These can range from returning back to work following a pleasant week spent in the south coast of France to suffering a flat tyre on the way into the office or having to deal with a difficult customer.