Brazil, China and US deals lift production
BUMPER orders for overseas markets boosted output at Britain’s factories in September.
Production including car making expanded at a “solid clip”, according to the latest purchasing managers’ snapshot of activity across the sector, which generates about 10 per cent of UK GDP.
Despite a slowdown from August’s fourth-month high, the IHS Markit/CIPS purchasing managers’ index (PMI) hit 55.9, its 14th month of expansion in a row and still well above the 50-point mark denoting growth.
Companies said demand was solid in domestic and overseas markets, with growth of export business among the best over the past six and a half years.
Sales increased to China, Brazil, the US and Europe, with firms enjoying an ongoing, albeit less prominent, lift from a weaker pound.
Expanding overseas customer bases is a key driver of expectations among a majority of manufacturers. They hope that production will rise over the coming year, along with investment plans and new product launches.
But firms have seen cost inflation surge due to sterling’s weakness, supply chain pressures and higher commodity prices. Lee Hopley at the manufacturers’ organisation EEF said: “Manufacturing continues to be a bright spot in the UK economy with the rate of expansion surpassing its long-run average in September on the back of buoyant global conditions which are boosting exports and supporting healthy production levels.
“However, while the PMI report gives plenty of optimism about the sector, it also highlights a couple of issues that could be a sign of challenges to come.
“Emerging problems in the supply chain, signalled by lengthening lead times, are likely related to the subdued investment performance of the past few quarters. Companies will only satisfy some capacity needs through additional recruitment, which needs to be complemented with higher capital spend on productivity enhancing investment.
“With the demand outlook holding up, government action in the forthcoming Budget to spur companies to commit to investment in the UK will be a priority.”