“UK manufacturing output is inching closer to the magic ’50-mark’. This indicates a continuation of the recovery, after contraction started a year ago. If the UK continues on its current trend, it might enter growth territory by Q2. What’s particularly interesting is that businesses appear more upbeat than consumers, suggesting leaders are increasingly gaining confidence in overall market conditions, including energy prices, inflation and interest rates. And that’s despite pertaining concerns about purchasing demand growth”.
“The deliberate drawdown in inventory continues, but for the first time we are seeing lead-times expanding driven by the Suez Canal situation. It will come to a point where businesses will not want to further decline inventories, which will likely bolster demand. Prices are also declining in the Eurozone, as we are seeing a passthrough in declining input costs. It seems that companies are not yet using the momentum to regain lost ground in margins over the last year. As the PMI has turned the corner and is close to reaching the 50 mark and inventories are low and lead times are expanding, companies may want to reevaluate their pricing strategies”.
“While the UK and the Eurozone have turned the corner and see an accelerated recovery starting 2024, today’s sub-50 PMI still indicates contraction and concerns remain. The ongoing Red Sea crisis and supply chain disruption is a case in point – just as inflation is beginning to cool-off.
“Manufacturers are becoming increasingly accustomed to operating in a consistently volatile environment. In particular – the ability to effectively scenario plan, separate signal from noise, and steadily handle overreactions to volatility – are becoming increasingly important. The latest activity scores may suggest businesses are increasingly putting this to practice.”