UK manufacturing output growth hits 32-month high

Output growth in the UK manufacturing industry has hit a 32-month high in July, supported by the sharpest rise in new orders since the end of 2018.

Business sentiment also recovered to its highest level in 28 months.

Survey data was collected between 13-28 July as part of the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI).

The index rose to a 16-month high of 53.3 in July, up from 50.1 in June and below the earlier flash estimate of 53.6.

The headline PMI – calculated as a weighted-average of five sub-indices – has posted above the neutral 50.0 mark, separating improvement from deterioration in each of the past two months.

Manufacturers linked the expansion to a further loosening of the lockdown conditions in place due to Covid-19. This allowed manufacturers to restart, or raise, production in response to clients reopening.

While a positive start to the recovery, it will take several months of growth to fully recoup the output lost since the start of the pandemic.

Manufacturing production was raised for the second successive month and to the greatest extent since November 2017. Growth was especially marked in the consumer and intermediate goods industries. Investment goods production also rose for the first time in 15 months. In all three subsectors higher production was underpinned by improved inflows of new work received.

New orders expanded for the first time since February, mainly reflecting a strengthening of domestic demand. In contrast, new export business fell for the ninth straight month, albeit to the weakest extent since February. Although restrictions in place to combat the pandemic constrained overseas demand, there were also reports of new order inflows starting to pick-up in several markets, including parts of Europe, the US and Asia.

Signs of economic recovery and expectations of client confidence strengthening led to improved sentiment among manufacturers during July. Confidence rose to its highest since March 2018, with 62% of companies expecting production to be higher one year from now. Only 12% of firms forecast a contraction. Sentiment strengthened across the consumer, intermediate and investment goods industries.

Commenting on the data, James Brougham, economist at Make UK, said: “UK manufacturers have been eager to embark on the road to recovery, and those efforts would appear to be bearing fruit with improved orders allowing industry a greater degree of confidence it needs to drive output up.

“Nevertheless, industry has been through a profound shock, the impact of which will continue to be felt for some time to come, especially in those sectors which have been most heavily affected. While the data from one month gives some cause for optimism we are going to need consecutive months of positive performance to recoup the deep losses incurred by the pandemic, a prospect that is threatened by the continued loss in jobs which we are likely to see coming through the pipeline.”

Markit Economics www.markiteconomics.com

Make UK www.makeuk.org

Company

Make UK

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