Manufacturing activity in the UK reached a 16-month high in July
Manufacturing activity in the UK reached a 16-month high last month, the fastest expansion since November 2017 IHS Markit / Cips UK Purchasing Managers' Index for Manufacturing (PMI).
The manufacturing purchasing managers' index rose from 50.1 in June, 40.7 in May and a record low from 32.6 in April to 53.3 in July (slightly after the flash value of 53.6).
The manufacturing sector benefited significantly from the gradual loosening of the restrictions, which allowed companies to increase or restart production.
The expansion of activity was led by the intermediate and consumer goods sectors. There was also an initial increase in capital goods production in 15 months, although it lagged the other sectors.
Further good news was that new orders rose for the first time in five months due to improved domestic demand, while confidence in future production rose to its highest level since March 2018.
The EY Item Club said that a sustained decline in manufacturing jobs reported by purchasing managers in July could cause Chancellor Rishi Sunak to consider taking further steps to support the fall budget labor market after the measures recently announced in the summer statement.
The economic forecaster also said the July survey of manufacturing purchasing managers strengthens hopes that the economy will return to significant growth in the third quarter, with around 12% expansion from the previous quarter as it benefits from reduced blocking restrictions. This assumes that there are no further restrictions. It is likely that the economy shrank about 20% in the second quarter from the previous quarter.
Howard Archer, chief economic advisor to the EY ITEM Club, said: “Production grew fastest in July since November 2017. This reflects the continued production after interruptions during the closure.
“The improvement in production was spearheaded by the intermediate and consumer goods sectors. There was also an initial increase in capital goods production in 15 months, although it lagged the other sectors.
“New business grew for the first time in five months with improvements in intermediates, consumer goods and capital goods. Domestic demand was pioneering. However, export orders fell for the ninth consecutive year, although they improved to a five-month high. Orders have been reported to increase in several markets, including parts of Europe, the United States and Asia. "
He added: “Confidence in the sector rose to its highest level since March 2018. Manufacturing jobs continued to decline in July, although the decline has been slowest since February. This could lead the Chancellor to take further steps to support the labor market in the autumn budget.
“Input prices rose the fastest in just over a year. Production prices rose more slowly, so that manufacturers' margins were depressed. "