UK manufacturers increase production in August UK manufacturers increase production

August saw UK manufacturers increase production at its fastest pace since February, along with a hike in employment within the sector to meet strong domestic and international demand, says Markit/Cips UK manufacturing PMI.

UK manufacturers increase production in August says IHT Markit

August saw UK manufacturers increase production at its fastest pace since February, along with a hike in employment within the sector to meet strong domestic and international demand, says Markit/Cips UK manufacturing PMI.

Factory sentiment jumped in activity to 56.9 in August from 55.3 in July – the second-highest level in more than three years, helped by the weak value of the pound. This counters forecasts for a slowdown to 55.0 in a Reuters poll of economists and was well above the 50 mark that separates growth from contraction.

Predictably, the weak pound following Brexit helped UK exports, significant demand from mainland Europe, the US, China and Australia. However, the greatest impetus for increased production came from the domestic market.

Economists say UK manufacturers are not allowing themselves to be blinkered or staggered by the Brexit process; instead, sentiment in this sector suggest they are more than open to embracing and exploiting opportunities in markets beyond traditional trading borders.

However, because no dream landscape exists without some dark clouds on the horizon, more than 600 industrial companies say higher raw materials and staff shortages could lie ahead, which could hit the pace of production in the future, leading to higher costs. But, Rob Dobson, a director at IHS Markit, said: “At the moment, the survey data suggests the manufacturing economy remains in good health, despite Brexit uncertainty, and should help support ongoing growth in the economy in the third quarter.”

In July production expanded by 0.5 pct, with a 13.7 pct rise in car production during the month seen to add significantly to the increase, according to the Office for National Statistics (ONS). The car production figure was significant in itself, as the fastest rise recorded in official data on the car industry since March 2009, with new models unsurprisingly contributing to the growth.

Overall industrial production rose by 0.3 pct in the three months to July, with a 2.2 pct increase in mining and quarrying explaining the rise.

The survey results “add weight to our view that the sector will put a disappointing first half to the year behind it”, Wishart said. “We expect the manufacturing sector to help overall GDP growth to accelerate in the second half of 2017.”

Whether it will prove a catalyst-to-degrees to encourage the Bank of England to now raise interest rates remains debatable.

Manufacturing performance is also up in  in Europe, despite the quite rapid hike in the value of the euro seemingly threatening exports; during August the eurozone manufactures say they saw the fastest rise in export orders since February 2011. IHS Markit’s manufacturing PMI for the eurozone rose to 57.4 in August, up from 56.6 in July, which some analysts translate to be solid confidence in the region for Q3,  says Claus Vistesen at research consultancy, Pantheon Macroeconomics.

  • The Markit/Cips UK manufacturing PM survey provides a snapshot of the UK economy before official figures are released later in the year, meaning the expectations for faster growth may fail to materialise.

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