Solid growth for UK manufacturing

UK Manufacturing ended the year on a high, with the UK Manufacturing PMI® finishing at 56.3.

Purchase Managers spoken to about the sector said that December showed steady growth and output following on from November’s high of 58.2.

Although output slowed from the previous month, the UK Manufacturing PMI® showed steady rates of expansion in output, new orders and employment, keeping a positive outlook with figures running well above long-run trends.

The headline PMI has now remained above the 50.0 no-change mark for 17 consecutive months, with the average reading over the final quarter of 2017 at 57.0, the best since the second quarter of 2014.

Expansion has been solid across all sectors, with manufacturing output and new orders both expanding in the past 17 months. Companies reported that production was scaled up in response to solid inflows of new work and the launch of new product lines.

Manufacturing seems to be avoiding the ‘Brexit effect’ with a solid increase in new export sales and increase in demand from clients in Europe, the USA, China and the Middle East.

With the rising levels of new works, this has had a positive influence on employment levels, with job creation registered for the seventeenth month in a row.

The figures show that increase in input costs eased to a four-month low in December, but remained marked overall. Companies linked higher costs to rising raw material prices, input shortages, suppliers raising their prices and the exchange rate. The cost of chemicals, electrical goods, electronics, metals, paper, plastics, timber and utilities were all reported as higher.

With such glowing figures, UK manufacturers are maintaining a positive outlook, close to 54% of companies expect production to rise over the coming year. And this has been reflected through investment in capacity and machinery, expected growth in domestic demand and export sales, new product launches and efforts to increase market share.

Rob Dobson, Director at IHS Markit, which compiles the survey: “UK manufacturing ended 2017 on a positive footing. Although growth of output and new orders moderated during December, rates of expansion remained comfortably above long-term trend rates. The sector has therefore broadly maintained its solid boost to broader economic expansion in the fourth quarter. The outlook is also reasonably bright, with over 50% of companies expecting production to be higher one year from now. “The main growth engines were the intermediate and investment goods sectors during December, suggesting resilient business-to-business demand and capital spending trends, albeit in part due to rising exports. Growth in the consumer goods sector remained weak in comparison and was the only sub-industry to see output expand at a slower pace than November.

“Rates of inflation in input costs and selling prices both moderated in December. Although still running at elevated levels, this at least provides signs that the recent surge in price inflation is starting to abate. This trend should continue at the start of 2018, as supply-chain pressures hopefully ease further.”

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply: “Purchasing activity and new orders maintained a healthy momentum this month, as domestic orders kept pace with rising export requests from the US, Europe and the Middle East.

“Supply chains paid the price of this success across all the sectors however, as suppliers were showing signs of strain under new and existing demand.

“Challenges over costs also remained, as input prices rose for the twentieth month in a row, partly as a result of shortages of some key materials and intense competition. But the sector was confident enough to offset these higher costs by raising its own prices as clients were demanding and business optimism was high.

“This self-assurance extended to continued jobs growth across all the sectors which will provide some relief to jobseekers in households still slightly hesitant about the future.

“The manufacturing sector’s performance is encouraging, showcasing a resilient response to the ebbs and flow of the year’s uncertainty with a sparkling end to a strong period of growth.”

 

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