The UK manufacturing sector remained resilient in May according to the Chartered Institute for Procurement and Supply. At 56.7, the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) was only slightly below April’s three-year high of 57.3.
This sustained most of the growth momentum gained during the prior survey month and signalled an improvement in operating conditions for the 10 successive month, says the CIPS. Manufacturing production and new orders both expanded at above survey average rates.
Companies benefited most from the continued strength of the domestic market. There was also a solid increase in new export business. Overseas demand improved. The level of incoming new export orders rose for the thirteenth month in a row.
- UK Manufacturing PMI at 56.7 in May
- Output and new order growth remain solid
- Rate of job creation at 35-month high
Intermediate goods sector leads
Sector data indicated that solid expansions of production and new orders were seen across the consumer, intermediate and investment goods categories. Output growth was led by intermediate goods. Growth moderated in the other two.
Ongoing expansion of the manufacturing sector had a positive impact on both business sentiment and job creation. Optimism regarding the outlook for production levels in one year’s time improved to a 20-month high.
Positivity reflected company expansions, efforts to improve market share and marketing strategies. Employment rose for the 10th consecutive month in May, with the rate of jobs growth the fastest since June 2014.
- Employment up fastest since June 2014
- Intermediate goods sector leads output growth
- Manufacturers boost capacity
Rising business confidence
Alongside solid new order inflows and rising business confidence, manufacturers also raised capacity in response to increased backlogs of work. Outstanding business expanded at the fastest rate in over six years (albeit only a moderate increase overall).
Rates of inflation in input costs and output charges remained elevated, despite easing further from recent highs. Increased costs reflected the exchange rate and rising raw material prices. There were also signs of a sellers’ market developing for some inputs.
This is due to supply shortages and an associated lengthening of vendor lead times. A number of manufacturers maintained sufficient pricing power to pass on higher costs to clients. The increase in selling prices was still among the fastest seen in the survey history.