It will not, I'm sure, have slipped anyone’s attention that the current business climate continues tolook worryingly uncertain.
Despite welcome reductions in energy prices, eurozone business activity shrank much more than expected in July as demand in the region’s services industry declined, and factory output fell at the fastest pace since COVID-19 first took hold.
The decline was broad-based with Europe’s two biggest economies - Germany and France – showingsigns of contraction. Indications are that the European Central Bank's sustained campaign of interest rate rises is starting to take its toll on consumers and affecting the services sector too.The Purchasing Managers' Index (PMI) for the euro area, seen as a good gauge of overall economic health, dropped below 50% for the first time this year, showing contraction rather than growth-lower than all expectations.
Activity in Germany, Europe's largest economy, contracted in July, increasing the likelihood of a recession in the second half of 2023, and in France, the downturn extended into July as both the services and manufacturing sectors did worse than expected.Here in the UK, the economy is growing at its weakest pace in six months as orders for businesses stagnate in the face of rising interest rates and still-high inflation. The decline has manifested itselfdespite manufacturers running down backlogs of work and cutting prices.
Factories benefited from a sharp drop in input costs due to falling demand for materials and improved supply.Sadly, no amount of optimism or bluff will hide or mask these issues, and consumers and manufacturers continue to face difficult and uncertain times, but having been in the industry for many years, I may be able to offer some optimism, albeit small and easily written rather than experienced. The rapid reduction in manufacturing within the plastics sector experienced at the end of the last century (how strange that sounds given its within most of our lifetimes), when offshoring decimated the industry, and then going through it all again in 2008/09 during the financial crisis of that period, produced, in both cases, a return to ‘normal’, with the rebound catching some of us off guard with its strength and speed – my fervent hope is that this will be the case again.
The UK plastics industry has some of the very best technology and individuals anywhere on the planet, and our ability to embrace new technologies and processes is second to none in my opinion. Several sectors of the manufacturing industry are still reporting that projects are “delayed not cancelled”, as end customers and suppliers endeavour to ride out the storm and manage the continually changing, complex situation – at some point, we will have to return to investment, but as in previous times, this will almost certainly have a very different look and feel to it.