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UK manufacturing in healthy shape despite election uncertainty UK manufacturing in healthy shape despite election uncertainty
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Britain’s manufacturers stepped up production and hiring last month to keep pace with strong demand from home and abroad.Britain’s manufacturers stepped up production and hiring last month to keep pace with strong demand from home and abroad.
The closely watched poll of factory sentiment came in just ahead of City economists’ expectations and suggested firms were shrugging off any uncertainty created by the general election. However, the responses from about 600 companies were collected between 12 and 25 May – before opinion polls started to show a significant narrowing in the Conservatives’ lead.The closely watched poll of factory sentiment came in just ahead of City economists’ expectations and suggested firms were shrugging off any uncertainty created by the general election. However, the responses from about 600 companies were collected between 12 and 25 May – before opinion polls started to show a significant narrowing in the Conservatives’ lead.
There were still signs that the Brexit blow to the pound was ramping up manufacturers’ costs in May, but the pace of price rises eased off recent highs. There was also further evidence that the pound’s weakness was helping exports by making UK goods cheaper for overseas buyers.There were still signs that the Brexit blow to the pound was ramping up manufacturers’ costs in May, but the pace of price rises eased off recent highs. There was also further evidence that the pound’s weakness was helping exports by making UK goods cheaper for overseas buyers.
The headline factory activity index on the IHS Markit/CIPS UK Manufacturing PMI edged down to 56.7 in May from April’s three-year high of 57.3. A reading above 50 signals expansion and below it, contraction. The index (pdf) briefly fell below that watermark after last June’s EU referendum but has now been in growth territory for 10 months. The headline factory activity index on the IHS Markit/CIPS UK Manufacturing PMI edged down to 56.7 in May from April’s three-year high of 57.3. A reading above 50 signals expansion; below signals contraction. The index (pdf) briefly fell below that watermark after last June’s EU referendum but has now been in growth territory for 10 months.
“The strong PMI numbers suggest the manufacturing sector has gained growth momentum in the second quarter after the sluggish start of the year,” said Rob Dobson, a senior economist at survey compiler IHS Markit. “The ongoing strength of the domestic market remains the main driver of the upturn. Growth of new export business played a lesser role in comparison, with the trend in foreign demand continuing to improve only in fits and starts, despite the assistance of a historically weak sterling exchange rate.”“The strong PMI numbers suggest the manufacturing sector has gained growth momentum in the second quarter after the sluggish start of the year,” said Rob Dobson, a senior economist at survey compiler IHS Markit. “The ongoing strength of the domestic market remains the main driver of the upturn. Growth of new export business played a lesser role in comparison, with the trend in foreign demand continuing to improve only in fits and starts, despite the assistance of a historically weak sterling exchange rate.”
The survey’s forward-looking measures suggested that the manufacturing sector could maintain its relatively solid pace of expansion. Growth of new orders, backlogs of work and business optimism were all strong. Against that backdrop, manufacturers took on new workers at the fastest pace since mid-2014.The survey’s forward-looking measures suggested that the manufacturing sector could maintain its relatively solid pace of expansion. Growth of new orders, backlogs of work and business optimism were all strong. Against that backdrop, manufacturers took on new workers at the fastest pace since mid-2014.
The upbeat survey will provide some support to those commentators that believe a strong manufacturing sector can offset some of the economic pain from a consumer spending slowdown this year. Higher prices and slow wage growth have eroded household budgets, denting the main driving force for UK GDP growth. The upbeat survey will provide some support to those commentators who believe a strong manufacturing sector can offset some of the economic pain from a consumer spending slowdown this year. Higher prices and slow wage growth have eroded household budgets, denting the main driving force for UK GDP growth.
The consumer squeeze was a key factor in the sharp slowdown in economic growth in the first quarter of 2017. Survey data has suggested the second quarter got off to a stronger start but economists warn that uncertainty stemming from Brexit negotiations could derail any upswing. They also advise against overplaying the importance of any strength in the manufacturing sector given it only makes up a 10th of the economy.The consumer squeeze was a key factor in the sharp slowdown in economic growth in the first quarter of 2017. Survey data has suggested the second quarter got off to a stronger start but economists warn that uncertainty stemming from Brexit negotiations could derail any upswing. They also advise against overplaying the importance of any strength in the manufacturing sector given it only makes up a 10th of the economy.