UK manufacturing showed further signs of recovery in August, with increases in output, new orders, and employment. The latest data from the S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) revealed a rise to 52.5, a 26-month high, indicating expansion for five of the past six months. Inflationary pressures also eased, with both input costs and selling prices rising at slower rates. In contrast, the Eurozone continued to struggle, with the Eurozone Manufacturing PMI remaining at 45.8, signalling ongoing contraction. Germany and France, two of the largest economies, contributed significantly to the downturn.
The UK’s manufacturing production rose for the fourth consecutive month in August, driven by an increase in new orders and efforts to fulfil existing contracts. The domestic market continued to play a key role in new contract gains, although export orders fell for the thirty-first consecutive month. This decline in overseas demand was attributed to several factors, including weaker demand from Europe, challenges in China, freight delays, and global political uncertainty.
Employment in the UK sector also saw a rise for the second consecutive month, with job creation at its highest level since July 2022. Large manufacturers saw the most notable increases in employment, although small businesses also saw mild growth. The sector’s performance was strongest in investment goods, with the consumer and intermediate goods categories also seeing some expansion, albeit at a slower pace.
The outlook for UK manufacturing remains positive, with 61% of companies expecting higher production over the next year. Factors driving optimism include new client wins, product launches, and hopes for broader economic recovery. However, the ongoing challenges in exports and supply chain issues, exacerbated by global conflicts and shipping costs, remain areas of concern.
Despite rising input costs due to higher prices for energy, metals, and other materials, the rate of price increases slowed. Manufacturers remained focused on improving efficiency, reducing costs, and maintaining cash flow. Supply chain constraints persisted, driven by issues such as longer shipment times and freight shortages. This combination of factors continues to challenge the sector, even as it experiences overall growth, particularly in the domestic market.
The UK’s manufacturing sector has shown resilience and adaptability, with domestic demand leading the charge. However, the challenges related to global trade, supply chains, and rising costs will need to be addressed to maintain this positive momentum in the coming months.
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