Manufacturing exports strongest in almost two years

1 October 2020

Manufacturing output continued to rise in September, boosted by new work from domestic and overseas markets, according to the latest PMI.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index recorded a dip in September to 54.1, following August’s two-and-a-half year high of 55.2. 

This showed the longest consecutive expansion of output since early 2019, with PMI maintaining figures above the no-change mark of 50.0 for four successive months.

Increased production was triggered by a rise in new work as companies reopened and more staff returned to work. While all sectors experienced growth, intermediate goods saw the fastest surge.

Export business was the strongest in almost two years as September records showed a second successive month of growth.

UK exports improved due to global economies easing Covid-19 restrictions and stronger demand from Europe, Asia and North America. 

New business has continued to rise since July due to “a combination of improving customer demand, rising export orders, recovery in the retail sector, and the reopening of schools”.

Manufacturers increased selling prices as input cost inflation hit a 21-month high due to higher raw material costs, rising competition and demand for inputs and consequent supply shortages, resulting in longer vendor lead times. 

Manufacturers remained hopeful, with three-fifths of respondents (60%) expecting output to improve in 12 months, with overall confidence close to July's 28-month high. Concerns around Covid and Brexit uncertainty are on the rise. 

Job losses remained a problem for the eighth consecutive month due to ongoing pandemic impacts.

Rob Dobson, director at IHS Markit, said: “September saw UK manufacturing continue its recovery from the steep Covid-19 induced downturn. 

“While the sector is still making positive strides, keep in mind that there remain considerable challenges ahead. The full economic cost incurred by 2020 will likely rise further as governments look to reintroduce some restrictions, job support schemes are tapered and rising numbers of firms start focusing on Brexit as a further cause of uncertainty and disruption during the remainder of the year.”

Duncan Brock, group director at CIPS, said: “The impetus behind this resurgence lies in the release of delayed projects and more people returning to work but the employment picture overall darkened significantly.

“Some firms continued to make use of the furlough scheme to retain their workforce, but larger numbers of redundancies this month means we have a wretched end to the third quarter as job numbers fell for the eighth month in a row. This in turn placed a strain on production capacity further down the supply chain.”

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