Exports help drive UK manufacturing growth to 16-month high

Will Green is news editor of Supply Management
3 November 2015

Growth in the UK manufacturing sector hit a 16-month high during October, according to a survey of buyers.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index rose steeply to 55.5 in October, up on a revised reading of 51.8 in August and against a no-change position of 50.

The domestic market was the prime source of new contract wins but exports also increased, with a rise in new work from clients in the Middle East, East Asia and the US.

David Noble, group CEO, CIPS, said: “The sector rode on the crest of an exports market wave taking full advantage of the opportunity to create a surge of output growth and new orders.

“Though domestically orders were still strong, it was export orders primarily from the Middle East, East Asia and the US that supported this expansion of work.”

Firms reported expansions in output and new business across consumer, intermediate and investment goods producers, though there was evidence growth was being driven by large companies with more subdued expansion at SMEs.

Price pressures remained weak during October, with a decrease in average input costs and an associated reduction in factory gate selling prices. Where a drop was reported it reflected ongoing reductions in global commodity prices, including metals, oil, oil-related products, plastics and timber.

Noble said: “With global raw material prices on a continuing downward path, purchasers increased their levels of stocks at a rate not seen for almost five years. So, if other sectors follow suit, there will be more conviction that UK economic recovery is at last ongoing and sustainable.”

Rob Dobson, senior economist at Markit, said: “The revival provides a tentative suggestion that the manufacturers are pulling out of their recent funk, having been dogged by recession since the start of the year, and may help boost economic growth in the fourth quarter.

“However, scratching further beneath the surface of the data reveals that the upturn is largely confined to the biggest manufacturers, who also benefitted most from the better export sales. Small and medium sized firms will also need to join in the recovery to help prevent the upswing from faltering.”

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