UK manufacturing sector makes ‘solid start’ to Q2 of 2017

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The start of Q2 in 2017 saw a ‘solid improvement’ in the performance of the UK manufacturing sector, according to the latest Markit/CIPS purchasing managers’ Index (PMI).

The PMI rose to a three-year high of 57.3 in April - up from the four-month low of 54.2 experienced in March and above the neutral mark of 50.0.

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

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, it added.

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, and manufacturers continued to pass on higher costs to clients, leading to a further increase in average output charges.

Additional findings show that companies mentioned paying higher prices for a wide range of materials, and companies purchasing and holding inputs in order to guard against future price increases rose.

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. Although price pressures remain elevated, input cost inflation has eased significantly since hitting a record high in January.”

Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said: “Following the strong first quarter for manufacturing, today’s PMI confirms that lift off continued at the start of the second, with the surge in the pace of expansion partly thanks to the resilience of the UK order pipeline and the fact the global economy is investing again.

“Against all expectations nine months ago, UK manufacturing appears to be in rude health, having navigated significant exchange rate swings and rising input costs, companies are capitalising on the upswing in the world economy and pressing ahead with some new investments. While all the indicators are pointing to the potential of another year of decent growth for manufacturing, the importance of a comprehensive and enduring industrial strategy for the UK must not get lost in the noise of election campaigning.”