UK manufacturing activity advances for sixth consecutive month: Markit
Production in the UK manufacturing sector advanced for a sixth consecutive month, according to a monthly release from Markit Group. The September PMI reading of 56.7 was below the median estimate, but remained in expansion mode and close to the two-and-a-half year peak of 57.1 in August.
The UK manufacturing sector rounded off its best quarterly performance since Q1 2011, as robust job growth carried the industry forward in September. Job creation reached a 28-month high, as manufacturing output continued to benefit from a strong domestic market. The September data showed growth was felt across the manufacturing industry, with all sub-sectors reporting an increase in output and new order volumes.
Greater demand from the US, Europe, Asia, the Middle East and Australia helped to grow new export business, as employers upped their hiring to meet production demand and large backlogs of work. However, as David Noble of the Chartered Institute of Purchasing & Supply rightly noted, “The domestic market remains the engine of growth across [the manufacturing industry], boosting new business in the UK and giving manufacturers added confidence.”
Purchase inflation continued to rise in September, although the rate of growth eased from the previous month’s two-year peak. Manufacturers reported growing cost pressures for commodities, energy, oil, and plastic, among other things. The higher input costs were the main factor behind higher output charges, the report concluded.
As manufacturing continues to grow, downside risk in the UK economy is declining, a trend that has supported the British pound in recent months. According to Markit senior economists Rob Donson, “the economy is growing faster than almost anyone expected.” With manufacturers reporting the strongest employment growth since May 2011, skepticism about the Bank of England’s forward guidance will continue to grow, with more market participants convinced the unemployment rate will reach its target of 7 percent well before mid-2016.
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