U.K. Factories in Record Slump as Coronavirus Upends Supply Chains

(Bloomberg) -- U.K. manufacturing contracted more than expected and households paid down credit as the coronavirus pandemic spread.

IHS Markit's April Purchasing Managers Index fell to the weakest reading since the series began in 1992 and below an initial flash reading published last month. Every sub-index declined from March -- including output, new orders and employment -- as a nationwide lockdown shuttered businesses and brought activity to a standstill.

Consumers, meanwhile, paid down the most credit in a month since records began, the Bank of England said in a separate report. It came in a month that saw retail sales fall the most ever as restrictions to control the coronavirus forced all but essential stories to close. Mortgage approvals dropped to the lowest level in seven years.

The figures underscore the widespread damage the virus has inflicted on the economy as people stay home from work and can't spend money in shops. Most analysts say the strength of the recovery will depend crucially on how much longer the lockdown lasts.

“We're already worse than we were in 2008,” Dartmouth College professor and former Bank of England policy maker David Blanchflower said in a Bloomberg Television interview. For the PMIs, “The lines are at record lows but that doesn't mean it can't go lower. The question then is what does a recovery look like?”

Nationwide Building Society said the housing market has all but ground to a halt as restrictions to control the spread of the pandemic prevents viewings and leaves transactions in limbo.

The pound was little changed after the reports.

The amount of money deposited with, and borrowed from, banks and building societies by private sector companies and households overall rose very strongly in March, the BOE reported. Sterling money holdings by households, non-financial businesses and non-intermediating financial companies rose by 57.4 billion pounds ($72 billion) in March, a series high and far above its previous six-month average of 9 billion pounds.

The PMI data also showed the impact the pandemic is having across global supply chains. Lead times lengthened as firms reported logistical issues, border difficulties for overseas goods, delays to shipping and air freight as well as supplier closures. Only companies producing medical or food-related goods saw increased orders or output, Markit said.

“The longer the global economy remains in lockdown the greater the cost to industry will grow, and the greater the likelihood that more jobs will be cut,” said Rob Dobson, director at IHS Markit.