Surprise boost for UK exports and manufacturing
Guy Platten, CEO of the UK Chamber, said the good news highlights the need for a trade-focused national industrial strategy
UK manufacturing activity received a boost last month thanks to a surge in export orders, according to a new survey.
The IHS Markit/CIPS UK manufacturing purchasing managers' index (PMI) rose to 55.1 in July, up from 54.2 the previous month.
Export orders rose last month at the fastest pace since April 2010, and at the second highest rate since the survey began, the report said. The weaker pound reportedly remained a "key driver" of export growth.
The headline PMI was boosted by stronger inflows of new work, higher levels of production, improved job creation, longer supplier delivery times and a slight increase in inventory holdings, the report said.
UK manufacturing production increased for the twelfth consecutive month in July, but at the slowest rate seen since March. Nevertheless, growth remains above the survey’s long-term average.
“As overall production showed a further increase compared to last month, it was the powerful rise in new export orders, the strongest since April 2010, which was the biggest surprise,” commented Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply.
Clients in North America, Europe, the Asia-Pacific region and the Middle-East all placed a higher inflow of work during July, according to the data.
Consumer goods producers’ output saw the biggest increase, followed closely by intermediate goods producers, the report said.
All this growth is accelerating job creation, IHS Markit found. Staffing levels rose for the twelfth straight month during July at the highest rate seen for three years.
“Price pressures also continued to ease in July, as the rates of input cost and output charge inflation both slowed further. Input prices rose at the weakest pace in over a year, down substantially from the record high seen at the start of the year,” said Rob Dobson, IHS Markit’s director of research.
“If this trend of milder price pressures is also reflected in other areas of the UK economy, this should provide the Bank of England sufficient lee-way to maintain its current supportive stance until the medium-term outlook for economic growth becomes less uncertain,” he continued.
Almost 49% of UK manufacturers surveyed by IHS Markit said they expect production to be higher in 12 months’ time, while only 5.0% expect to see a contraction.
“Any downside to this now prolonged level of expansion is the strain on supply chains, as delivery times were stretched to the biggest extent since May 2011, and suppliers struggled to provide a number of key materials such as rubber, aluminium and some chemicals,” said Duncan Brock.
Guy Platten, CEO of the UK Chamber of Shipping, welcomed the survey’s findings, commenting:
“This is a welcome boost to the UK economy but moreover it should be the UK Government’s ambition to see cargo vessels leave UK ports as full as when they arrived. To do this, we need the UK’s industrial strategy to be heavily focused on trade, particularly as Government seeks to sign trade deals with governments around the world."
UK-based manufacturers of marine products have had a bumpy twelve months since the value of the pound tumbled as a result of the Brexit referendum, as the UK Chamber reported in June.
Marine manufacturers said they expect the weakness of the pound will be short-lived and that a ‘real’ upturn will come when the currency market settles down.