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UK manufacturing grows at fastest rate for 20 years

02 September, 2013

The UK manufacturing sector has maintained its strong start to the third quarter of 2013, with growth rates for output and new orders during August at their highest since 1994, according to the latest Markit/CIPS Purchasing Manager’s Index (PMI). The seasonally adjusted PMI hit a two-and-a-half year high in August, and has expanded for five successive months.

“The UK’s factories are booming again,” says Rob Dobson, senior economist at survey compiler, Markit. “Orders and output are growing at the fastest rates for almost 20 years, as rising demand from domestic customers is being accompanied by a return to growth of our largest trading partner, the Eurozone.

“The sector therefore continues to build on the solid 0.7% expansion registered during the second quarter, and growth could easily break the 1% mark in the third quarter,” he adds. “Manufacturing is clearly making a strong positive contribution to the economy, providing welcome evidence that the long-awaited rebalancing of the economy towards manufacturing and exports is at last starting to take place now that our export markets are recovering.

New orders rose for the sixth month running and to the greatest degree since August 1994. The domestic market was the main source of new contracts, although there was also a solid increase in overseas demand.

But not all of the news is positive.

“While the latest PMI suggests that the output side is increasingly positive, the news on the other fronts is much less so,” says Dobson. “Employee numbers crept up only slightly, as companies squeezed extra output from existing resources. At the same time, the rate of input cost inflation surged upwards on the back of rising oil and related prices.”

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