Bottling

Bottling production line

Rise in new work drives UK manufacturing forward

The start of the second quarter saw a solid improvement in the performance of the UK manufacturing sector, according to the latest research by Markit/CIPS.

Rates of expansion in output, total new orders and new export work all gathered pace in April, underpinned by robust business confidence and driving further job creation.

The seasonally adjusted Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to a three-year high of 57.3 in April, up from March’s four-month low of 54.2. Survey data were collected 11-25 April.

The PMI has signalled expansion for nine months in a row. The last time the PMI registered below its no-change mark was July 2016, the month following the EU referendum result.

Rob Dobson, senior economist at IHS Markit, said: “The UK manufacturing sector made a solid start to the second quarter. Growth of output, new orders and employment all gathered pace, driven higher by the continued strength of the domestic market.

“There was also a solid bounce in new export business, as the weak sterling exchange rate helped manufacturers take full advantage of the recent signs of revival in the global economy, and especially the eurozone, which is enjoying its best growth spell for six years.”

UK manufacturing output was driven higher by the strongest inflows of new work since January 2014, with the domestic market remaining the principal source of new contract wins.

There were also reports of a solid increase in new export business, reflecting a combination of stronger global market conditions and the historically weak sterling exchange rate. Both contributed to higher demand from clients in North America, Europe, Africa and Brazil.

The exchange rate also continued to have an impact on cost pressures. The rate of purchase price inflation remained elevated and above the long-run survey average, despite easing to a nine-month low.

It is worth also noting that the pace of increase was down sharply from January’s record high. Manufacturers continued to pass on higher costs to clients, leading to a further increase in average output charges.

Dean Turner, economist at UBS Wealth Management, said: “Today’s figures suggest the buoyant mood in the manufacturing sector is not relenting, with new export orders in particular benefiting from the robust global economic backdrop.

“One note of caution, however. With last week’s GDP figures showing a slowdown in growth, PMI indexes continue to signal a far greater sense of growth than the hard data – though markets will be bothered little by this nuance.

“The latest data on rising costs and prices adds to mounting evidence for increased inflation in the months ahead. This is likely to provide a further brake on consumer spending, with natural repercussions for future output.”