04 October 2005 | Anusha Bradley
Confidence in the UK manufacturing sector received a boost in September with its fastest growth rate for six months.
The latest data from the CIPS and Royal Bank of Scotland's Purchasing Managers Index (PMI) shows businesses were encouraged to expand and new orders increased for the fourth consecutive month.
The overall PMI - a composite indicator of sector conditions from CIPS and NTC Research in which an index above 50 indicates growth - registered 51.5, up from 50.1 in August.
The new orders index rose to 54.1, reflecting improved global conditions, successful marketing activities and a growth of new export orders.
Foreign demand grew at the fastest rate for more than a year with UK manufacturers benefiting from an increase in new business from the US, EU, East Asia and the Middle East.
Roy Ayliffe, director of professional practice at CIPS, said: "Purchasing managers saw the recent upturn in the UK manufacturing sector gain momentum in September."
The seasonally-adjusted backlogs of work index registered 48.9, a decrease on the previous month, which suggests a capacity in the sector to cope with the rise of new and existing contracts.
However, soaring oil and energy prices continued to present a challenge to firms who were only able to pass on part of the cost to customers.
The latest seasonally adjusted input prices index was 59.3.
Inflation of output prices reached a seven-month high but manufacturer's margins continued to be squeezed with input costs rising faster than output prices.
The report said: "Rising oil and energy prices remained the principal factors pushing up manufacturers' input costs in September, as the rate of inflation reached a five-month high. There were also reports of increased plastics, metals and chemicals prices."
In an effort to offset higher input prices a number of companies reported reducing their workforce. Meanwhile other firms hired more staff to cope with the higher output and new orders.
At 48.1, the seasonally-adjusted suppliers' delivery times index pointed to a fourth consecutive increase in average delivery times.
The Institute of Supply Management (ISM) in the US said its monthly index climbed to 59.4 in September from 53.6 in August, posting its highest level in 13 months with increased rates of production, new orders, employment and exports.
The RBS/NTC Eurozone Manufacturing PMI rose from 50.4 in August to 51.7 in September, indicating the strongest upturn in manufacturing business conditions for seven months.
• Coverage of previous months' manufacturing, construction and services PMI reports is available at www.supplymanagement.com/pmi