UK manufacturing growth fastest for 20 years

1 September 2013

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2 September 2013 | Will Green

The UK manufacturing sector saw output and new orders grow at their fastest rate in almost two decades in August.

The seasonally-adjusted Markit/CIPS UK Manufacturing Purchasing Managers’ Index hit 57.2 in August – against a baseline of 50 that indicates no change – compared with a revised July figure of 54.8.

The August figure represents a two-and-a-half year high for the index, while growth rates for output and new orders were at their highest since 1994.

The PMI has signalled expansion for five successive months, but cost inflationary pressures surged higher in August on the back of raw material price rises. High growth rates were reported across consumer, intermediate and investment goods, although the performance of intermediate goods was strongest.

The domestic market was the main source of new contracts, but there was a solid increase in overseas demand. Firms linked higher order volumes to new product launches, promotional activity and improved client confidence, while exports were linked to stronger demand from the US, China, the Eurozone, India, Scandinavia, Brazil and Ireland.

However, input prices rose at the fastest rate for two years, with companies reporting higher prices for feedstock, oil, paper, polymers and timber. Average selling prices also increased, but to a lesser degree. Purchasing activity increased, with input buying volumes growing at the fastest pace since October 2010. Jobs continue to be created in the sector, with positions filled in production, research, management and support teams.

Rob Dobson, senior economist at survey compilers Markit, said: “Manufacturing is clearly making a strong positive contribution to the economy, providing welcome evidence that the long-awaited rebalancing of the economy towards manufacturing and exports is at last starting to take place now that our export markets are recovering.”

David Noble, CEO at CIPS, said:

“The continued growth in new orders has placed pressure on suppliers however, with average delivery times lengthening for the third consecutive month. Employment growth, too, was muted in the last month as firms sought to maximise staff capacity before recruiting. These temporary pressures are by no means terminal. However, the sharpest rise in input prices in two years is a pressing concern and will be one to watch in the coming months as firms try to protect their profit margins.”

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