Purchasing activity increases at manufacturers

Will Green is news editor of Supply Management
3 December 2018

Growth in UK manufacturing accelerated slightly in November with the domestic market the main source of new contract wins.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index rose to 53.1 in November, up on 51.1 in October and against the no-change reading of 50.

Expansion was linked to new product launches and client stock-building, with output rising across consumer, intermediate and investment goods.

But the level of new export business dropped for the second straight month in November, the first back-to-back contractions since early 2016, with companies citing reduced client interest from overseas and ongoing Brexit uncertainty. Only the consumer goods sector saw an increase in new export business.

Inflation of input costs and selling prices accelerated, remaining above the survey averages, linked to higher commodity prices, ongoing exchange rate effects and shortages of certain raw materials.

Average vendor performance continued to deteriorate as already strained capacity at suppliers was further tested by an increase in purchasing activity, with reports of raised input buying and stocks to guard against Brexit and supply chain uncertainties.

The survey produced a mixed picture regarding the business outlook, with 46% forecasting output would be higher in 12 months’ time and less than 10% expecting a contraction, though the overall degree of optimism dipped to a 27-month low.

Duncan Brock, group director at CIPS, said: “The leading light that was new export orders weakened for a second consecutive month as domestic clients contributed to the pipeline of new work.

“Also fears over possible raw material shortages in the coming months meant some firms were hoarding stocks to weather any supply chain disruptions. Suppliers remained in control, and this further frustrated business already tussling with the longer lead times and stock unavailability.”

Rob Dobson, director at IHS Markit, said: “Although November saw the headline PMI regain some lost ground and trends in output, new orders and employment picked up slightly from a weak October, growth is still among the weakest seen over the past two-and-a-half years.

“Based on its relationship against official ONS data, the survey indicators suggest manufacturing output is on course to make no contribution to GDP growth in the final quarter, with a clear risk of output contracting unless December proves a stronger month.”

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