Industry output stabilises as factories restart – PMI data

Output edged back into growth territory as factories restarted, lockdown restrictions were loosened and staff returned to work.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose to 50.1 in June, up from 40.7 in May and unchanged from the flash estimate.

Although the 9.4 point month-on-month rise in the PMI beat May's record (8.1), the reading was only slightly above the neutral 50.0 mark, indicating a stabilisation in operating conditions.

Manufacturing production rose slightly for the first time in four months during June, as factories restarted, clients reopened and lockdown restrictions were eased. The intermediate goods sector saw the steepest growth, while consumer goods producers saw only a mild expansion. In contrast, investment goods output fell again, albeit at a vastly reduced pace.

Business sentiment rose to a 21-month high in June. Over 63% of manufacturers forecast that output would rise over the coming year. Positive sentiment was linked to clients reopening, an expected further loosening of COVID-19 restrictions and hopes that markets would revive at home and overseas to help recover growth lost during the pandemic.

Commenting on today’s PMI data, James Brougham, economist at Make UK, said: “Today’s figures bear the fruit of the concerted effort industry has been making to navigate through the economic crisis the country has faced. With production having restarted under the most testing circumstances, manufacturers are leading the UK’s economic recovery.

“However, the headline sentiment may be hiding the jobs pain to come as the country exits lockdown, with employment having fallen for five consecutive months despite the Government furlough scheme. This may only be delaying rather than preventing significant redundancies.”

Markit Economics www.markiteconomics.com

Make UK www.makeuk.org