UK manufacturing strengthens in June

At 57.5 in June, up from 57.0 in May, the Markit/CIPS Purchasing Manager's Index (PMI) posted its second-highest reading in 40 months, bettered only by last November's 57.8. The PMI has now signalled expansion throughout the past 16 months. Furthermore, the average index reading during the second quarter is the highest since Q1 2011. Manufacturing output increased for the 16th successive month in June. Although the rate of growth eased to a three-month low, it stayed elevated and sufficient to ensure the average pace over the second quarter as a whole was the strongest for 20 years. The latest survey saw robust production growth maintained across the consumer, intermediate and investment goods sectors. The level of incoming new business rose at the fastest pace since November 2013 and to one of the greatest extents since the survey began in 1992. The domestic market remained the prime source of new contract wins, although inflows of new export business also strengthened. UK manufacturers reported growth in new work received from clients in Europe, Asia and the Middle East. There was also mention of companies making a further push into new markets aided by new product launches and the brightening economic situation. Subsequently, the rate of increase in new export orders accelerated to a five-month high. Manufacturing employment rose for the 14th successive month in June, as improved inflows of new business and increased production encouraged firms to expand capacity. The steepest rate of job creation was registered by SMEs, although large-scale producers also reported a solid increase to payroll numbers. Ms Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "The latest PMI continues the positive run for manufacturing seen so far this year and, the pick-up in activity in June signals a strong second quarter. So far this year it's been the domestic market that had been a particular source of strength but, we should be encouraged that new orders from overseas markets are now coming through. "We've seen a big focus on new product and service innovation across industry over recent years and this survey provides a bit more evidence that this paying off with companies securing new business off the back of it. Following five consecutive quarters of employment growth, it seems companies are continuing to expand their workforce, although this comes with the challenges of securing the right skills." Rob Dobson, senior economist at survey compiler Markit, said: "UK manufacturing continued to flourish in June, rounding off one of the best quarters for the sector over the past two decades. With levels of production surging higher, and order books swollen by a further upswing in demand from both domestic and overseas clients, job creation accelerated to its highest for over three years. "The goods-producing sector has clearly maintained its leading position in spurring broader economic growth. We expect official manufacturing production to have expanded in the second quarter at a pace above the 1.5% registered in the first quarter, making further headway into recovering pre-crisis output levels. "Sustaining the recovery will remain the key and, on this front, the news also remained upbeat. As a broader expansion is also a more sustainable expansion, the ongoing surging growth of output and new orders across capital, consumer and intermediate goods producers alike is exactly what is required. Solid job creation across these sectors and at both SMEs and large producers bodes well not just for manufacturing but for sustaining the broader economic upturn as well."