UK manufacturing gets 'post referendum bounce'

Will Green is news editor of Supply Management
3 October 2016

UK manufacturing growth rose to a two-year high in September as the sector experienced a “post referendum bounce”.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index climbed to 55.4, up on 53.4 in August and the highest since June 2014. A neutral reading of 50 indicates no growth or contraction.

The domestic market remained a prime driver of new business, while the weaker sterling exchange rate drove up new orders from abroad.

Growth was led by the consumer goods sector but there were also substantial increases at intermediate and investment goods producers.

Manufacturers reported improved demand from clients in Asia, Europe, the US and certain emerging markets.

The growth was linked to rising employment and increased purchasing activity, with input buying volumes among the highest for two years. This put pressure on vendors and in September there was the steepest lengthening in supplier lead times since May 2011.

David Noble, group CEO, CIPS, described the situation as a “post referendum bounce”. “Competition for raw materials increased, along with input prices, as shortages in metals, chemicals and food were reported,” he said.

 “It is difficult to say whether this solid rebound will be sustained, however, as there will potentially be more challenges and uncertainties ahead.”

Rob Dobson, senior economist at IHS Markit, said: “On the price front, input costs are still rising at a double digit annual rate, as the weaker sterling exchange rate drove up import prices. This led to a further solid increase in output charges. However, with rates of inflation easing in both cases, it looks as if the recent surge in inflation may not quite reach the peaks of previous bouts in 2008 and 2010-11.”

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