Manufacturing growth accelerates at start of Q4
Data collected 13-28 October 2014
Manufacturing PMI at three-month high of 53.2
Growth acceleration led by domestic demand, as new export order decline
Price pressures remain relatively subdued
The UK manufacturing sector made a bright start to the final quarter of 2014, with rates of expansion in production and new business accelerating sharply from their September lows. The pick up in growth mainly reflected the resilience of the domestic market, as overseas demand was impacted by the ongoing economic weakness of the eurozone and the euro-sterling exchange rate.
At 53.2 in October, recovering from September’s 17-month low of 51.5, the seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) remained above the neutral 50.0 mark for the twentieth month in a row. The latest reading is slightly above the third quarter average of 53.0.
Manufacturing production rose for the nineteenth successive month in October. Although the rate of expansion remained below the average for the year-so-far, it nonetheless recovered from September’s low to reach a three-month high. The latest scaling up of output was underpinned by improved inflows of new work and efforts to clear outstanding business.
Strong increases in production were signalled for the consumer and intermediate goods sectors, while capital goods manufacturers also saw a solid gain in output volumes.
Growth of incoming new business also accelerated to a three-month high in October, led by solid gains in new work from domestic-based clients. In contrast, new export orders fell for the second straight month.
The latest decline in foreign demand for UK manufactures was centred on the eurozone, reflecting the subdued economic performance of that region and further stymied by the exchange rate. Slower growth in other key markets, such as the US and China, were also mentioned by some companies.
Manufacturing employment rose further during October. The continuation of the current spell of job creation is a positive in itself, but it is worth noting that the rate of increase slipped to its second-slowest since last June. Staffing numbers rose sharply at SMEs, but were held steady at larger-scale producers.
Price pressures remained relatively subdued during the latest survey month. Input costs fell for the second month running, mainly reflecting reductions in commodity and oil prices. Meanwhile, average output charges rose at the slowest pace during the current 16-month sequence of increase. Companies mentioned lower purchase prices and competitive pressures as reasons behind lower output charges.
David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply:
“The manufacturing PMI this month received a domestic-fuelled boost as the index reported growth at a three-month high. With new export business declining, it was the UK picking up the new business tab, as the Eurozone continued to experience weakened economic growth with the added punch of unfavourable exchange rates.
“Supply chain managers reported production levels rising for the nineteenth month buoyed up by falling input costs. A drop in commodity and oil prices especially has given the sector an advantage in tackling any outstanding orders and improving the pace and delivery of any new work. This in turn contributed to lower output price inflation, which was further influenced by competitive pressures.
“The sector also experienced a rise in employment levels, especially in SMEs. As demand increased, so SMEs reacted to the changing landscape with a more agile response to developing employment capacity, whereas larger companies kept their staffing levels steady. Supplier delivery times continued to extend for the seventeenth month in a row as purchasing managers reported lower stock levels, transportation and more competition for raw materials as the reasons for a slower response.”
The November 2014 Report on Manufacturing will be published on:
Monday 1st December 2014 at 09:30