UK manufacturing climbs to highest level since 2013

November saw the UK manufacturing sector move up a gear, with rates of increase in new orders and production among the best registered since 2013.

This tested capacity and encouraged further job creation, with employment rising to the greatest extent since June 2014.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose to 58.2 in November 2017, up from 56.6 in October (originally reported as 56.3), its highest level since August 2013. The reading is the 10^th best registered during the near 26-year series history. The latest survey was conducted between 13-27 November.

Manufacturing production expanded at the fastest pace since September 2016 and to one of the greatest extents during the past four years. Companies linked this to stronger inflows of new orders, reflecting solid domestic demand and steeper gains in new export business.

Some companies noted higher sales to clients in Europe, the Americas, Asia and the Middle East. There were also reports that the historically weak sterling exchange rate continued to boost export competitiveness (although mentions of this were less prevalent than earlier in the year).

The expansion remained broad-based by subsector. Strong and accelerated growth of production and new orders was registered across the consumer, intermediate and investment goods industries. Investment goods producers saw an especially marked increase in new orders, the sharpest seen since August 1994.

Backlogs of work at UK factories increased for the first time in six months during November. Tighter capacity combined with rising demand encouraged companies to increase employment. Staffing levels rose for the 16^th successive month, with the rate of jobs growth the highest since June 2014.

November saw purchasing costs rise at a pace close to October’s seven-month high, reflecting increased commodity prices (including for oil and steel), exchange rate effects and higher vendor prices due to supply chain constraints. The latter was also highlighted by a further substantial lengthening in average supplier delivery times.

Output charges continued to rise at a substantial clip, the fastest for seven months and among the highest during the past six-and-a-half years. Companies linked the latest increase to stronger demand boosting their pricing power and the pass through of rising costs to clients.

Manufacturers maintained a positive outlook for the sector in November, with over 50% expecting production to be higher in one year’s time. Optimism was linked to company growth plans, capital spending, improving market conditions and efforts to grow client bases.

Markit www.markit.com

CIPS www.cips.org