The UK manufacturing industry flourished in October, the monthly Purchasing Managers’ Index suggests, contrary to analyst expectations of a second successive fall in the reading.
September’s PMI from the Chartered Institute of Purchasing and Supply and data company Markit hit a 10-month low level of 53.5 and analysts had expected a fall last month to 53.1. Instead, October registered 54.9 – the highest since July. Anything above 50 infers growth on the measure, which considers orders, employment, output, supplier performance and stocks of purchases.
The Bank of England is now expected to use this, along with the 0.8 per cent rise in GDP from October, as evidence that further fiscal stimulation is not necessary for the economy at this current time.
Production rose for the first time in seven months in October, with the intermediate goods sector weighing in with the biggest increase, accompanied by more modest gains in the capital and consumer goods arenas. This was underpinned by a marked increase in export orders and employment, which grew at its fastest pace since a 15 year high in June.
However, manufacturers expect prices to rise sharply in the coming months and purchased enough stocks in October to put raw materials holding at a survey record of growth. In addition, vendor lead times increased to their highest in 2010 so far, with manufacturers anecdotally blaming shortages in materials.
“Exports are very much the engine of growth within manufacturing at the moment,” reflects David Noble, chief executive of CIPS. “Whilst it is very positive to see the sector expanding strongly again, it’s difficult to predict the impact of fluctuations in export markets so the recovery may continue to be bumpy. What is clear is that manufacturing looks set to drive further GDP growth in Q4.
“New orders are providing manufacturing purchasers with a mandate to increase activity and hire new staff, but inevitably, there will be hard graft ahead as pressure on supply chains remains a big concern. The increased buying activity happening now is calculated to replace depleted stock and avoid expected input price increases, which are already being passed on to customers.”
The UK manufacturing industry flourished in October, the monthly Purchasing Mangers’ Index suggests, contrary to analyst expectations of a second successive fall in the reading.
EEF senior economist Jeegar Kakkad said that although the extra interest from overseas in UK goods is very welcome, the manufacturing industry needs support at home if it is to continue its good form.
“With public sector cutbacks yet to weigh on the private sector recovery, the government must not take its eye off the ball in tackling potential stumbling blocks for growing businesses, such as access to finance,” he said.
