UK manufacturers beat cost pressures

1 June 2006
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02 June 2006 | Gareth Mytton

The UK manufacturing sector overcame the strongest inflation in input prices for 16 months to post another big rise in activity last month, according to the purchasing managers' index (PMI) report.

The PMI, a composite indicator of business conditions from CIPS and NTC Research in which 50 indicates no change on the previous month, stood at 53.2, a slight fall on April's 54.

Output rose on the back of increased new orders at home and abroad, in particular from the euro-zone, Japan and the US.

Companies have now managed to increase the prices of their finished goods for 10 consecutive months, owing to higher input costs - particularly steel, aluminium, brass and copper - and strong customer demand, which enabled firms to increase prices.

Roy Ayliffe, director of professional practice at CIPS, said: "The unrelenting recovery being experienced by the sector is bolstering manufacturer's outlook about the future with levels of confidence hitting another high."

Meanwhile, the US manufacturing economy also grew in May. The Institute for Supply Management's (ISM) report on business put the PMI at 54.4, a fall of 2.9 on the previous month.

Like their UK counterparts, US manufacturers had to battle a big rise in input costs. Prices rose for 23 commodities in May, but fell for only two. Norbert Ore, chair of ISM manufacturing business survey committee, warned: "Prices, driven by raw materials costs, are a concern."

SMjun2006

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