Britain’s manufacturers are reporting an increase in new orders and production, a situation that is testing capacity and encouraging job creation.
These are some of the findings from November’s IHS Markit/CIPS Purchasing Managers’ Index (PMI), which shows a seasonally adjusted rise to 58.2, its highest level since August 2013. The reading is also the tenth-best registered during the near 26-year series history of the PMI.
Manufacturing production expanded at the fastest pace since September 2016 with companies linking this to an increase in new export orders and a steady inflow of work from domestic customers.
Some companies noted higher sales to clients in Europe, the Americas, Asia and the Middle East. There were also reports that the historically weak sterling exchange rate continued to boost export competitiveness.
The expansion remained broad-based by subsector. Strong and accelerated growth of production and new orders was registered across the consumer, intermediate and investment goods industries. Investment goods producers saw the sharpest increase in new orders since August 1994.
Backlogs increased for the first time in six months during November with tighter capacity encouraging companies to increase employment. Staffing levels rose for the sixteenth successive month, with the rate of jobs growth the highest since June 2014.
According to the PMI report, November saw purchasing costs rise at a pace close to October’s seven-month high, reflecting increased commodity prices (including for oil and steel), exchange rate effects and higher vendor prices due to supply-chain constraints. The latter was also highlighted by a further lengthening in average supplier delivery times.
Manufacturers maintained a positive outlook for the sector in November, with over 50 per cent expecting production to be higher in one year’s time. Optimism was linked to company growth plans, capital spending, improving market conditions and efforts to grow client bases.
Rob Dobson, director at IHS Markit, said: “On its current course, manufacturing production is rising at a quarterly rate approaching two per cent, providing a real boost to the pace of broader economic expansion.
“The breadth of the rebound is also positive, with growth strengthening across the consumer, intermediate and investment goods industries. Of real note was a surge in demand for UK investment goods, such as plant and machinery, with new orders for these products rising to the greatest extent in over two decades. This suggests that capital spending, especially in the domestic market, is showing signs of renewed vigour.
“On the price front, rates of inflation in input costs and output charges remained elevated. Manufacturers have seen supply-chain constraints and rising demand for raw materials overtake exchange rate effects as the primary motivator of price increases. The coming months should provide greater evidence on any impact that the recent interest rate increase from the Bank of England will have on reining in cost pressures.”