UK manufacturing production rises at fastest pace since May 2014

According to the report from IHS Markit/CIPS, August saw UK manufacturing output expand at the fastest rate for over six years, as companies and their clients restarted operations following coronavirus disease 2019 (COVID-19) lockdowns. New order intakes also strengthened, whereas the trend in employment remained weak with job losses recorded for the seventh straight month. Survey data were collected between 12-25 August.

The seasonally adjusted PMI rose to a 30-month high of 55.2 in August, up from 53.3 in July but a tick below the earlier flash estimate of 55.3. The PMI has posted above its neutral 50.0 mark for three consecutive months.

Manufacturing production rose at the fastest pace since May 2014, reflecting solid expansions across the consumer, intermediate and investment goods sub-sectors. The steepest growth was registered in the intermediate goods category, whereas investment goods producers saw the lowest pace of growth.

Underpinning the scaling-up of output was the fastest increase in new orders since November 2017. The domestic market remained the prime source of new contract wins, although new export orders rose moderately for the first time in ten months. Manufacturers mentioned improved demand from the EMEA region, North America and Australia.

Manufacturing employment declined at one of the steepest rates during the past 11 years, with reductions seen across the consumer, intermediate and investment goods industries. 

Stocks of purchases and finished goods both fell further, as companies looked to control costs and complete business delayed by the lockdown. Input inventories fell despite a modest increase in purchasing activity. Input price inflation accelerated to a 20-month high in August. 

Business sentiment regarding future output prospects remained positive in August, staying close to July's 28-month high. Companies linked their expectations of output growth to hopes of a move back to more normal operating conditions over time, the launch of new products and the ongoing reopening of the domestic and global economies.