Friday, 3 May 2019
Could manufacturing slowdown signal strategic destocking?
Commenting on the latest results from the Markit/CIPS PMI manufacturing survey, Mike Thornton, head of manufacturing at RSM said:
‘In normal circumstances a slowdown in output would be seen as a negative, but we’re are not in a normal trading environment. In an effort to stockpile products, production levels over the last few months have skewed the figures, so a slowdown shows that manufacturers are using the latest Brexit extension to take stock and plan for the future.
‘The financial markets reacted positively to the six-month extension, as the risk of a cliff edge no-deal Brexit decreases, and rhetoric around a softer Brexit or possibly a second referendum builds. Within in this context, the slowdown in output could mean that manufacturers are preparing to destock, which is a sensible move. Not panicking and flooding the market with low priced goods; but a gradual, strategic sales process close to exiting pricing structures to help to reduce the risk around carrying high levels of stock and ensure profitability.’Back