It’s the first day of the month,  and that means it is time for the latest Purchasing Managers Index  (PMI) from the Chartered Institute of Purchasing Supply  (CIPS) and Markit.  This is usually a tad dull,  but not this time.  This time the finding really is something to make you sit up.

Latest PMI data indicated that UK manufacturers are currently facing the toughest operating conditions in the seventeen-year survey history.  The headline seasonally adjusted Purchasing Managers’ Index fell sharply to a record low of 41.0 in September,  as levels of output,  new orders and employment all contracted at the fastest rates in the series history.

Companies were especially hard hit by the ongoing weakness of domestic demand,  as the downturns in the credit,  housing and construction markets led to further reports of clients cancelling or postponing orders.  Conditions were also weak in foreign markets,  as new export business fell at the fastest rate for seven years.  Lower demand from overseas clients was mainly attributed to the ensuing slowdown of the global economy.

The downturn was most severe in the consumer goods sector in September,  where output and new orders both fell at series record rates.  New work received also contracted at a record pace in the intermediate goods sector,  which led to production being scaled back at the second greatest extent recorded by the survey-to-date.  Output rose slightly at capital goods producers,  despite a further sharp decline in new orders.

Paul Dales, UK economist at Capital economics said the “fall in the CIPS/Markit manufacturing PMI from 45.9 in August to 41.0 left it at its lowest level since January 1992.  At this level,  the survey is roughly consistent with the official measure of manufacturing output falling by a whopping 7 per cent p.a. compared to August’s -1.4 per cent.  Perhaps more worrying was the further weakening in the official measure of services output given that the services sector makes up 75% of overall GDP.  In the three months to July,  services output was flat compared to the 0.2% rise in Q2.  If services output were flat in August and September,  this would be enough to reduce Q2 GDP growth from 0.0% to at least -0.1 per cent in Q3.  Overall,  these figures bring the UK economy much closer to recession.”

But at least there was some good news.  CIPS said  “the seasonally adjusted Input Prices Index came in at 73.7, down sharply from 78.1 in August,  as input cost inflation eased to a seven-month low,  as recent falls in the prices of oil and other commodities continued to filter through to companies.”