Strong growth of output, new orders and jobs in June round off

CIPS 1 July 2014

Manufacturing PMI at 57.5 in June

Markit/CIPS UK Manufacturing PMI® posted 57.5 in June.

- Order inflows strengthen as demand improves in domestic and export markets
- Job creation at 39-month high, led by rising SME headcounts

At 57.5 in June, up from 57.0 in May, the headline seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) posted its second-highest reading in 40 months, bettered only during this period by last November’s 57.8. The PMI has now signalled expansion throughout the past 16 months.

Furthermore, the average index reading during the second quarter is the highest since Q1 2011. Manufacturing output increased for the sixteenth
successive month in June. Although the rate of growth eased to a three-month low, it stayed elevated and sufficient to ensure the average pace
over the second quarter as a whole was the strongest for 20 years. The latest survey saw robust production growth maintained across the consumer, intermediate and investment goods sectors.

The level of incoming new business rose at the fastest pace since November 2013 and to one of the greatest extents since the survey began in 1992. The domestic market remained the prime source of new contract wins, although inflows of new export business also strengthened.

UK manufacturers reported growth in new work received from clients in Europe, Asia and the Middle East. There was also mention of companies
making a further push into new markets aided by new product launches and the brightening economic situation. Subsequently, the rate of
increase in new export orders accelerated to a five-month high.

Manufacturing employment rose for the fourteenth successive month in June, as improved inflows of new business and increased production
encouraged firms to expand capacity. The steepest rate of job creation was registered by SMEs, although large-scale producers also reported a
solid increase to payroll numbers.

Price pressures rose during June, as average input costs increased for the first time since January and selling price inflation picked up.

The increase in purchase prices was centred on the intermediate goods sector. Some firms linked this to shortages of certain raw materials, a factor further highlighted by a sharp lengthening in supplier lead
times. In contrast, input costs fell at manufacturers of consumer and investment goods.

David Noble, Group Chief Executive Officer at the Chartered Institute of Purchasing & Supply:  “The Manufacturing PMI hit a seven-month peak in
June, rounding off its best quarter in over three years. The strong domestic market supported production and was the prime source of new
business and sales, although new export orders also edged higher this month. Indeed, the brightening economic conditions and new product
offerings meant that there was a healthy appetite to push into new markets.

“Over the second quarter, firms have enjoyed their best spell of output growth for 20 years, and in response have been able to boost employment
even further this month. A rise in the number of jobs was seen across all sectors as well as across both SMEs and large companies, adding to signs that the economic recovery is broadening.

“On the price front, input prices rose slightly for the intermediate goods sector for the first time in four months. Added to this, heightened by shortages in raw materials, delivery times lengthened to the greatest extent in three years, indicating suppliers are grappling with the pace of growth and the demand it has brought.”

The July 2014 Report on Manufacturing will be
published on: Friday 1st August 2014 at 09:30

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