A rise in domestic demand led to a solid improvement in the performance of the UK manufacturing sector during October, according to the latest research by Markit/CIPS.
Production and new order volumes continued to rise at robust rates during October, as companies benefited from strong domestic market conditions.
Price pressures remained elevated, however, with rates of inflation in input costs and output charges both accelerating and staying well above historical series averages.
The seasonally adjusted index showed a reading of 56.3 for October, up from 56.0 in September and coming in above economist expectations of 55.9.
The solid performance of the manufacturing sector was also reflected in the labour market. Job creation was registered for the 15th successive month, with the pace of growth improving to a 40- month high.
Staffing levels were raised to cope with increased production requirements, company expansion plans and to meet expected future demand growth. Over 50% of manufacturers forecast output will be higher in one year’s time, compared to only 8% who anticipate a decline.
Rob Dobson, director at IHS Markit, said: “UK manufacturing made an impressive start to the final quarter of 2017 as increased inflows of new work encouraged firms to ramp up production once again.
“The sector looks to be achieving a quarterly rate of expansion close to 1%, therefore sustaining the solid pace of growth signalled by the official ONS estimate for the third quarter.
“The domestic market remained strong, whereas new export orders increased at a slightly slower pace, the latter showing signs of being hit by the recent strengthening of sterling.
“Price pressures continued to build, however. Input costs rose at the fastest pace in seven months, leading to the steepest rate of selling price inflation since April.
“Higher demand for raw materials, combined with increased supply-chain constraints, mean annual input price inflation is moving back into double-digit rates, which may feed through to higher pressure on consumer prices in coming months.
“The continued robust health of manufacturing and rising price pressures will help cement expectations of the Bank of England hiking interest rates for the first time in a decade as Thursday’s announcement approaches.”
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