Manufacturing production suffered a steep decrease in August indicating that the sector is "already in recession", a leading economist has warned.
While the Bank of England has predicted that the UK economy as a whole will go into a 15-month recession from the fourth quarter of this year, the latest CIPS Manufacturing PMI recorded a seismic shift as the top-line measure of activity fell into negative territory for the first time since May 2020 when stringent Covid lockdown measures were in place. The decline from 52.1 to 47.3 was also the biggest fall since November 2008, when the UK was at the height of the banking crisis.
"Today’s data suggests the manufacturing sector is already in a recession, ahead of the rest of the economy," said Thomas Pugh, economist at RSM UK.
"As a much more intensive consumer of energy, the manufacturing sector has been hit even harder by the huge run-up in energy prices over the last month. This will inevitably lead to reductions in output as particularly energy intensive firms cease production and once viable firms face becoming loss-making."
Mr Pugh added that the sector is also facing a drop in demand as household spending power is squeezed by the same surge in energy prices. This is limiting producers' ability to pass on cost increases.
"That said, if the government offers a substantial support package for households and businesses through the winter, then the worst of the coming recession can be avoided," he added.
"Indeed, we think this recession will be one of the smaller ones on record with a peak-to-trough drop in GDP of between one and two per cent. That compares to a drop of 6% in the financial crisis and over 20% during the pandemic."
Scotch whisky giant Chivas reports "robust" sales
Chivas Brothers, the Dumbarton-based Scotch whisky giant, has reported strong sales of its flagship brands amid a “robust” performance in emerging markets, while underlining its commitment to investing in the sustainability of its operations.
The distiller behind the Ballantine’s and Chivas Regal brands highlighted a significant increase in global demand for Scotch whisky and emphasised its "resilience" amid the growing cost-of-living crisis as it reported a 25 per cent rise in net sales for the year to June. Mature markets saw growth of 16%, while sales increased by 34% in emerging markets; growth was especially strong in Brazil and India.
eToro Beer Index shows 62% surge in beer costs
The cost of the commodities required for the production, packaging and transportation of beer has risen by 62% in the past two years, according to social investing platform eToro’s inaugural Beer Index.
eToro, based in Israel, noted the rate of price growth “dramatically outpaces the 12% rise in the UK consumer price index over the same period, indicating there is likely to be some price pain to come for beer drinkers as brewers look for ways to offset their costs".
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