Weak pound gives UK manufacturing boost in August

British manufacturing output grew with a ‘solid rebound’ in August, according to the Markit/CIPS UK Manufacturing PMI report.

Citing the weak sterling currency, UK Manufacturing PMI posted 53.3 in August, a ten month high for the sector.

New work from domestic and export sources were seen in the month and employment rose for the first time in the year-to-date.

The report said: “Manufacturing production increased at the fastest pace in seven months during August, an improvement on the contraction registered in the prior month. All three of the market groups covered by the survey returned to growth, with the strongest expansion registered in the consumer goods sector.

“Underpinning the scaling up of production volumes was a marked increase in the level of new work received. New business rose at one of the quickest rates in the year-so-far, as companies benefited from improved inflows of new work from both domestic and overseas clients. There were also reports of stronger demand, product launches and clients committing to new and previously postponed contracts.”

However, the report did note the negative impact of currency movement – input price inflation surged to a sobering five year record high, with 44% of firms noting increased purchasing costs.

Rob Dobson, Senior Economist at IHS Markit, which compiles the survey, said: “The August PMI data indicates a solid rebound in the performance of the UK manufacturing sector from the steep downturn that followed the EU referendum. Companies reported that work that had been postponed during July had now been restarted, as manufacturers and their clients started to regain a sense of returning to business as usual. The domestic market showed a marked recovery, especially for consumer products, while the recent depreciation of sterling drove higher inflows of new business from the USA, Europe, Scandinavia, Middle East and Asia.

“Inflation is raising its ugly head, however. Rates of increase in input prices and output charges both hit five-year highs, which manufacturers placed squarely at the door of the cost impact of sterling on import prices. It is too early to say whether the rebounds in growth and inflation will be sustained, but the upturn in August suggests that the weaker exchange rate and recent policy action have helped to avert a downturn.”

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply: “The Brexit brakes are off, as the sector surged ahead with the PMI hitting a 10-month high reflecting rapid expansions in both activity and new orders.

“Fuelled by a combination of export and domestic orders, the increase in the level of the headline PMI equalled its best during the survey’s quarter of a century history. “With exchange rates supporting more orders overseas, the counter effect of a lower pound meant that purchasing costs were higher, which was reported by 44% of procurement managers. Staffing levels rose at a modest pace, after falling throughout the year-to-date. SMEs fared better with more hires, whereas larger companies reported shedding some jobs.

“An increase in stock building could signal more positive hope for the coming months, but it remains to be seen whether this expansion of activity is merely filling the post-Brexit void or whether this strong performance will continue.”

Damian Hennessey, Director of Proto Labs, commented: “Digital manufacturing is fuelling innovation across major processes and production methods, reinvigorating the industry and opening up a whole host of new opportunities for UK manufacturers.

“From advances in automation and manufacturing processes, to significant developments in existing technologies such as 3D printing, CNC machining, and injection moulding, the industry is experiencing an ongoing transformation which is helping it meet rapid customer demand and exceed previous short-term forecasts. This increase in the UK’s industrial output is clear evidence of how, rather than declining, the manufacturing industry is set for continued growth.”