Manufacturing 'unfazed' by UK general election

Will Green is news editor of Supply Management
1 June 2017

UK manufacturing growth remained above average in May, buoyed by a strong domestic market and a solid increase in exports, according to the latest PMI.

The sector was “unfazed by the looming election” but continuing expansion hit supply chains, with lengthening delivery times and sourcing troubles.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index eased to 56.7 in May, down on April’s three-year high of 57.3 but above the long-term average. A reading of 50 signals neither expansion nor contraction.

The key growth driver was the domestic market, while the overseas market improved due to the weak sterling and firms’ efforts to launch new products in foreign markets.

There were expansions in production and new orders across consumer, intermediate and investment goods, though the intermediate goods sector was the strongest performer.

Rates of inflation for input costs and output charges remained elevated in May, despite easing from recent highs, against the background of the weak sterling and rising raw material prices. There are signs of a sellers’ market developing for some inputs.

Duncan Brock, director of customer relationships at CIPS, said optimism was at a 20-month high and the sector was “storming ahead unfazed by the looming election”.

“These continuing levels of expansion have taken their toll on supply chains however, as purchasers reported lengthening delivery times and sourcing difficulties for a number of key materials.

“To meet these demands employment levels grew at their fastest levels since June 2014, which is good news for jobseekers, though the question mark over a continuing skills shortage in the UK will continue along the path to Brexit and the years ahead.”

Rob Dobson, senior economist at IHS Markit, said: “On this basis the sector should have sufficient momentum to see it through the uncertainty generated by the current unexpected general election and into the start of Brexit negotiations later in the quarter.”

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