UK manufacturing starts Q3 on a ‘solid footing’

The PMI sat at 55.1 in July – up from 54.2 in June and above the neutral mark of 50.0.

Markit says that 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 rate of expansion in new orders accelerated during July. However, the improvement in the pace of increase was still among the slowest registered over the past year. This was despite a boost from the trend in new export business, as foreign demand rose at the second-strongest rate in the series history. Companies reported improved inflows of new work from clients in North America, Europe, the Asia- Pacific region and the Middle-East. The domestic market also remained a positive contributor to order books.

Additional findings show that manufacturing production increased for the twelfth successive month in July. The ongoing upturns in output and new orders also encouraged further job creation in July.

Meanwhile, cost pressures eased in July and UK manufacturers maintained a positive outlook at the start of the third quarter.

Says IHS Markit director Rob Dobson: “UK manufacturing started the third quarter on a solid footing. The headline PMI signalled a growth acceleration for the first time in three months during July, as new order intakes were boosted by a near survey-record increase in new export business. Although the exchange rate remains a key driver of export growth, manufacturers also benefitted from stronger economic growth in key markets in the euro area, North America and Asia-Pacific regions.

“Continued expansion is also still filtering through to the labour market, with the latest round of manufacturing job creation among the best seen over the past 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. 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.”