PMI points to above average rise in production and new orders for UK manufacturers

Production and new orders are said to be rising at above long-run average rates, although there are signs that cost inflationary pressures are increasing. This is reflected in a combination of rising commodity prices, the exchange rate and increased supply-chain pressures.

Increases in output were attributed to rising intakes of new business and although the latest gain in new orders was slower than the prior survey month, companies reported that demand remained solid in domestic and overseas markets.

Growth of new export business remained among the best registered over the past six-and-a-half years with reports of increased sales to Europe, the USA, China and Brazil. Some firms also mentioned an ongoing boost from the historical weakness of sterling, although this was less prominent as a factor than earlier in the year.

The outlook for the manufacturing sector also remained positive, with September seeing over 51 per cent of companies reporting that they expect production to rise to rise over the coming year.

Such optimism is reflected in efforts to expand overseas customer bases, improve efficiency, undergo company expansion and investment plans, and launch new products.

September also saw further job creation at manufacturers, albeit at slower rate of increase compared to August’s three-year record. Despite this, it remained broad-based across the consumer, intermediate and investment goods industries.

Input costs and output charges rose at faster rates in September, with the upswing in purchasing costs linked to rising commodity prices, the exchange rate and supply-chain constraints. The latter included lack of vendor capacity and shortages developing for a number of inputs.

This was also reflected in the trend in vendor performance during September, as lead times lengthened to the greatest extent since April 2011.

Input cost increases were passed on (at least in part) to clients, leading to the steepest increase in output charges for four months.

Commenting on the latest figures, Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking, said: “Sentiment in the industry is good and companies are putting plans in place for continued growth, such as boosting export orders, increasing productivity and developing new products.

“The annual MHA Manufacturing and Engineering report released last month found that despite the uncertainty from Brexit, the majority of businesses have achieved growth over the past 12 months and remain optimistic about the future.

“While there are challenges ahead, notably around the value of sterling and the recruitment of skilled workers, the sector is in a strong position. We expect this to continue in the coming months.”