January manufacturing PMI brings cautious optimism, says RSM UK

01 February 2023

Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index which has increased from 45.3 in December to 47.0 in January, Mike Thornton, national head of manufacturing at RSM UK, said: ‘After a turbulent few months, the January manufacturing PMI indicates the sector may be turning a corner, giving us cause for cautious optimism for the year ahead. While not ideal that the headline PMI is still below 50, it has risen from 45.3 to 47.0, demonstrating contraction of the market has at least slowed. 

As January’s input prices fell to 60.4 from 62.0, output prices rose again to 61.3 from 60.1 last month. This is the first time output prices have been above input prices since mid 2020, and indicates the sector is getting on top of pricing. The output index has also risen from 44.4 to 47.0, demonstrating output is slowly rising in response to an increase of new orders of 3 points, from 41.4 to 44.4. It’s also pleasing to see that the supplier delivery times index continues to increase, up from 46.8 to 47.8, indicating that the sector is now much more in control of supply chains and therefore more able to respond to increasing future demand.”

Thomas Pugh, economist, RSM UK added: ‘The manufacturing sector has led the economy during this downturn. Although we have seen consistent contraction for the past six months, today’s data suggests things are gradually improving. As costs of raw materials and energy prices start to come down again, we should see further signs of recovery for manufacturing. The squeeze on profit margins seems to be easing, bringing some much-needed relief to the sector. We will be watching keenly to see what the future output index data shows next month, as historically we have been used to seeing figures in the 70s and 80s, and we are now back up to 72.8, up from 67.9 last month. Signs are encouraging, and suggest the manufacturing sector may be over the worst.’