Manufacturing growth spurt continues – PMI figures

THE UK manufacturing sector continued to expand at a marked pace during September to round off its strongest quarterly performance since the opening quarter of 2011.

At 56.7 in September, the seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) remained in expansion territory for the sixth successive month and was little-changed from August’s two-and-a-half year peak of 57.1.

Manufacturing production expanded for the sixth consecutive month in September, with the rate of increase staying close to August’s 19-year high.
The growth rate in incoming new orders also lost only minor impetus from a similar peak reached in the prior survey month.

The domestic market remained the prime source of new contact wins. 

September data indicated that the growth in output and new order volumes was felt across the manufacturing industry, with all of the sub-sectors covered by the survey reporting increases in both.

The level of new export business also rose in September, but only moderately and to the weakest extent since May.

Companies reported higher demand from the US, Europe, Asia, Middle East, Scandinavia, Latin America, Russia and Australia.

September saw manufacturing staffing levels rise at the fastest pace since May 2011. Increased employment supported efforts to raise production and clear backlogs of work. Subsequently, the level of work-in-hand fell at a slightly faster pace than during the previous month.

Prices continued to rise in September, with both input costs and output charges higher than one month ago. Although the rate of purchase price inflation eased from August’s two-year peak, it remained above its average for the year-to-date. 

Manufacturers reported higher prices paid for commodities, dairy products, energy, feedstock, oil, paper and plastic. A key bellwether of future input price increases – average supplier lead times – also pointed to raw material cost pressures building. Factory gate prices, meanwhile, increased for the third month running and to the greatest extent since September 2011.

The main factor driving up output charges remained higher input costs. However, there were also reports of selling prices being raised to protect, or even improve, operating margins.

Rob Dobson, senior economist at survey compilers Markit said: “UK manufacturing continues to boom, adding to the flow of upbeat data which suggest that the economy is growing faster than almost anyone expected. The September PMI survey showed rates of output and new order growth retreating only slightly from the 19-year peaks seen in August. 

“Job creation is also on the rise, with manufacturers reporting the strongest employment growth since May 2011 as firms took on more staff to meet faster order book growth.

“These numbers are encouraging in respect to the rebalancing of the economy, with goods production likely to provide a major stimulus to economic growth in the third quarter.”

Richard Halstead, Midlands region director at EEF, the manufacturers’ organisation, said: “This is another solid month for manufacturing with output, orders and employment all up, paving the way for a decent quarter of growth across the sector.

“The good run of indicators should continue beyond the end of this year with some expansion in manufacturing taking place in Europe, Asia and the US.

“However, if there are reasons for caution, the challenge of the whole supply chain ramping up production to meet growing demand given the persistent weakness in investment is one.

“A second concern is inevitably around any certainty that the positive outlook globally will be sustained.”