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UK manufacturing output hit a 32-month high in July

03 August, 2020

Output from the UK manufacturing sector hit a 32-month high during July, supported by the sharpest rise in new order volumes since the end of 2018, according to the latest IHS Markit/CIPS Purchasing Managers’ Index (PMI). Business sentiment also recovered to its highest level in 28 months.

A similar picture is being reported from most of Europe’s main manufacturing nations, with Spain hitting a 27-month high, Italy recording its best PMI for 25 months, France hitting a 22-month high, and Germany recording its best figures for 19 months. Two exceptions were The Netherlands, which recorded a four-month low and Greece where a two-month low was reported.

The UK manufacturing PMI for July was 53.3 – anything higher than 50 is in positive territory. According to IHS Markit and the CIPS (Chartered Institute of Procurement & Supply), who compile the figures, UK manufacturers are linking the expansion to a further loosening of the pandemic lockdown conditions, allowing them to restart, or raise production. IHS/CIPS point out that it will take several months of growth to fully recoup the output lost since the start of the pandemic.

Manufacturing production in the UK rose for the second successive month and to the greatest extent since November 2017. Growth was especially marked in the consumer and intermediate goods industries. Investment goods production also increased for the first time in 15 months. In all three sub-sectors, higher production was underpinned by improved inflows of new work received.

“Despite the solid start to the recovery, the road left to travel remains long and precarious,” warns IHS Markit director, Rob Dobson. “An extended period of growth is still needed to fully recoup the ground lost in recent months. This is also the case for the labour market, where job losses are continuing despite businesses reopening. There is a significant risk of further redundancies and of furloughed workers not returning unless demand and confidence stage more substantial and long-lasting rebounds in the months ahead.”

James Brougham, economist at the manufacturers’ association Make UK, also strikes a note of caution. “Industry has been through a profound shock, the impact of which will continue to be felt for some time to come, especially in those sectors which have been most heavily affected,” he says. “While the data from one month gives some cause for optimism, we are going to need consecutive months of positive performance to recoup the deep losses incurred by the pandemic – a prospect that is threatened by the continued loss in jobs which we are likely to see coming through the pipeline.”

“UK manufacturers have been eager to embark on the road to recovery,” he adds, “and those efforts would appear to be bearing fruit with improved orders allowing industry a greater degree of confidence it needs to drive output up.”

The UK manufacturing sector's PMI rebounded sharply in July. Any number above 50 represents an improvement of the previous month; any figure below 50 represents a deterioration
Source: IHS Markit / CIPS

For Duncan Brock, group director at the CIPS, the July PMI figures show that “the makers were on the march again in July as production started to flow more easily and businesses saw new orders rise at the fastest pace since the end of 2018.

“Driven largely by demand from the domestic market, clients looked towards building more localised supplier bases as opportunities for trade were unblocked with the end of the UK’s lockdown,” he adds. “However, overseas customers failed to deliver any positive news. Export orders fell for the ninth month in a row, exposing the ongoing fragility of the broken global marketplace due to the pandemic.

“The employment situation also remained bleak,” Brock continues, “as job shedding continued and businesses re-modelled their strategies to the shrinking opportunities. With a ravaged economic landscape it will be a slow train to recovery, managing the ebbs of flow of potential disruptions to come.”




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