The latest expansion of incoming new work was only marginal and the slowest recorded since September 2009. Survey respondents widely pointed to a cyclical slowdown in client spending patterns, with demand relatively subdued in both domestic and export markets. In addition to a general moderation in new business growth during December, some manufacturers also cited the impact of ongoing cuts to investment spending across the energy sector.
Manufacturing production increased only moderately in December, with the rate of expansion the weakest for just over two years. Softer output growth was widely linked to a weaker-than-expected upturn in new business volumes and a corresponding drop in capacity pressures. Reflecting this, latest data highlighted a decrease in backlogs of work for the second month running, and the pace of decline was the fastest since late-2012.
In contrast to the trends for output and new orders, a solid pace of employment growth was maintained across the manufacturing sector during December. The latest upturn in payroll numbers marked two-and-a-half years of sustained job creation, which survey respondents mainly linked to expectations of improving demand in 2016.
Manufacturers were more cautious about their purchasing activity and inventory volumes in December. Input buying expanded at the slowest pace for just over two years, while pre-production stocks decreased for the first time since June 2014. Finished goods inventories rose marginally in December, but some manufacturers linked the upturn to weaker-than-expected sales at the end of the year.
Slower growth of input buying contributed to a stabilisation in suppliers’ delivery times during December, thereby ending a five-month period of worsening vendor performance. At the same time, average input costs fell again at manufacturing companies, while factory gate price inflation remained only marginal. Survey respondents widely commented that falling commodity prices had led to lower cost burdens at the end of 2015.