UK manufacturing remained in expansion territory in September, but the pace of output growth weakened for a second consecutive month as higher energy, transport and input costs added to pressures facing manufacturers.
The S&P Global UK Manufacturing PMI rose marginally from 51.7 in August to 51.9 in September, extending its run of expansion to 11 consecutive months. However, output growth slowed to its weakest rate in the current six-month sequence of expansion.
The latest survey found that output, new orders and employment all increased during September. New business rose for a tenth consecutive month and at a faster rate than in August, with manufacturers reporting stronger demand from both domestic and export markets, including the US, Asia-Pacific, Brazil and Australia.
However, the recovery remained uneven across the sector. Growth was concentrated in investment goods, where production increased at its fastest rate since the end of 2017. By contrast, consumer and intermediate goods manufacturers recorded contractions. Small manufacturers also experienced sharp falls in production and new business, in contrast to continued growth among medium-sized and large producers.
Employment provided a further positive signal, with manufacturing headcounts increasing for a sixth successive month. The rate of job creation remained close to August’s two-year high, as companies increased staffing to meet rising orders and growing backlogs. Outstanding business expanded for the second time in three months.
Supply chain pressures return
Supply chains came under renewed pressure during September. Average vendor delivery times increased markedly, with supplier performance deteriorating at its fastest rate since June. S&P Global attributed the disruption to port congestion, shipping delays, geopolitical tensions and resulting shortages of raw materials.
The disruption was accompanied by renewed inflationary pressure. Input cost inflation accelerated for the first time in four months, with manufacturers reporting higher prices for chemicals, electronics, energy and food. Rising transport costs, often linked to higher diesel prices, also contributed to the increase.
Manufacturers responded by increasing their selling prices, with output charge inflation strengthening in September. Selling prices have now increased for ten consecutive months, while both input and output price inflation were higher among SMEs than larger producers.
Rob Dobson, director at S&P Global Market Intelligence, said the September figures showed a further slowdown in manufacturing production, with orders and exports growing only modestly.
He said higher energy prices had contributed to slower demand growth, while the survey’s price measures had shifted from signalling easing inflationary pressures to a renewed increase.
“Energy and electronics prices remain especially elevated, while supply disruptions and rising diesel prices are now hitting transportation costs across industry,” Dobson said.
Despite the slowdown, manufacturers retained a broadly positive view of the year ahead. Some 49% of companies expect output to increase over the next 12 months, although confidence was slightly below August’s six-month high. Planned expansions, new product launches and expectations of a rebound in market confidence and investment were among the reasons cited for optimism.
Dobson said confidence remained subdued compared with the period before the outbreak of the war in the Middle East, with geopolitical issues and uncertainty over domestic policy weighing on sentiment. He added that the upcoming Budget would be important in determining the direction of business confidence.
UK manufacturing growth trails eurozone
The UK expansion remained slightly weaker than that recorded across the eurozone in September. The S&P Global Eurozone Manufacturing PMI rose from 52.7 in August to 52.9, its highest level since May 2022, while eurozone manufacturing output rose to 53.6, a 55-month high.
The eurozone recovery also showed broader-based momentum: all eight countries covered by the survey recorded expansion, while new orders increased at their fastest pace since March 2022. Employment also returned to growth, following three years of decline.
S&P Global said the eurozone upturn was being driven particularly by demand for investment goods such as machinery and equipment, with AI and defence-related equipment highlighted as areas of stronger demand. However, like the UK, the region saw renewed inflationary pressure, with both input costs and output prices rising at faster rates in September.
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