The headline seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) rose to a 16- month high of 55.5, an improvement on the upwardly revised figure of 51.8 posted in September (originally reported as 51.5).
The 3.7 point gain in the PMI level was one of the steepest registered during the near 24-year survey history. October saw solid improvements in the rates of growth in output and new orders, in both cases the sharpest since the middle of last year.
The domestic market remained the prime source of new contract wins, while back-to-back increases in new export business were signalled for the first time since the third quarter of 2014.
Sector data pointed to broad-based expansions of both output and new business during October, with rates of increase moving higher at consumer, intermediate and investment goods producers. However, the latest survey still provided evidence that growth is being driven by a narrow section of the manufacturing industry, as strong and surging growth at large-sized companies contrasted sharply with the more subdued expansion at SMEs.
Manufacturing employment rose for the 13th successive month in October, as improved new order intakes and efforts to clear backlogs of work encouraged firms to raise capacity. Large scale producers reported a robust increase in staffing levels, whereas SMEs saw little change in employment since September.
Price pressures remained on the downside during October, as highlighted by a further decrease in average input costs and an associated reduction in factory gate selling prices.
The rate of input cost deflation was only slightly slower than September’s 16-year record. Where a decrease was reported, this mainly reflected the ongoing reductions in global commodity prices. A wide range of raw materials were cited as being down in price, including metals, oil, oil-related products, plastics and timber.
Lee Hopley, chief economist at EEF, said: “Expansion in output and orders across all firm sizes and sectors has aligned to produce a remarkable bounce in the manufacturing PMI, a significant departure from the decline in production reported in official data over the past three quarters.
“Decent domestic demand continues to provide a strong spur for this month’s positive reading, but a pick-up in export demand from the Middle East and the US also provides some reasons for cautious optimism. This is the first positive survey for manufacturing for some months and if this translates into an improvement in the official data, the sector could still post growth this year.”
Mike Rigby, head of manufacturing at Barclays, added: “Though much-needed, after three consecutive quarters of falling output, many will find October’s rebound in manufacturing numbers a tad surprising and will eagerly await November’s figures to see how sustainable the bounce back is. Buoyant as orders from some exports markets may have been, the appreciation of sterling and the impact this has on competitiveness within our main export market, the Eurozone, continues to test UK manufacturers.”
