UK manufacturing activity at 30-month high in August

UK manufacturing activity reached a 30-month high in August as firms across the UK restarted operations after the coronavirus lockdown. 

UK manufacturing activity at 30-month high in August

According to the latest IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) the manufacturing PMI rose to 55.2 in August (revised down marginally from the ‘flash’ reading of 55.3) from 53.3 in July, 50.1 in June, 40.7 in May and a record low of 32.6 in April.

Solid expansion was reported across the intermediate, consumer and investment goods sectors. The strongest expansion was seen in the immediate goods sector and the weakest in investment goods.

The outlook for business investment still looks uncertain given the difficult times many companies have had and the still-significant uncertainty over the longer-term outlook for the recovery.

The PMI also indicated that new business rose for a second successive month and at the fastest rate since November 2017. Domestic demand led the way.

Export orders also increased for the first time in 10 months, with improved orders reported from the EMEA region, North America and Australia.

Howard Archer, chief economic advisor to the EY ITEM Club, commented on the figures: “Confidence in the manufacturing sector edged back in August, but was still close to July’s levels – which had been the highest since March 2018. Confidence was supported by expectations of output growth, hopes of a move back to more ‘normal’ operating conditions over time, the launch of new products and the ongoing reopening of the domestic and global economies.

“Employment in the manufacturing sector fell for a seventh month running, at a slightly increased rate in August. This may prompt the Chancellor to consider further steps to support the labour market in the Autumn Budget, following the measures announced in July’s Summer Statement.

“Input prices rose at the fastest rate for 20 months. Output prices rose at the fastest rate since March, but manufacturers’ margins were squeezed.”

Rob Dobson, director at IHS Markit, said: “The recovery of the UK manufacturing sector gathered pace in August. Output expanded at the fastest rate in over six years as new work intakes rose to the greatest extent since November 2017, led by an upturn in domestic demand and signs of recovering exports.”

He said that the survey indicated that business optimism also remained “encouragingly robust” and close to July’s peak. 

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