Manufacturing production continued to grow at the end of the third quarter (Q3), but the pace slowed for a second month and was the weakest in the current six-month expansion period. Manufacturers raised output in response to higher new order inflows, with demand increasing from domestic customers and export markets including the US, Asia Pacific (APAC) region, Brazil and Australia.
UK manufacturing PMI rose to 51.9 in September from 51.7 in August, keeping the sector in expansion for 11th month in a row.
Output growth slowed to a six-month low, while new orders, exports and employment still increased.
Longer lead times, port congestion, shipping delays and diesel-led transport costs are lifting supplier and factory-gate prices.
New business received by UK manufacturers rose for a tenth month and at a faster rate than in August. Performance varied sharply by sub-sector and size: investment goods recorded the strongest output growth since the end of 2017, while consumer goods and intermediate goods contracted. Small manufacturers reported steep declines in production and new orders, in contrast with gains at medium-sized and large producers, S&P Global said in a press release.
Employment increased for a sixth straight month in September, with the pace of job creation remaining close to August’s two-year high. Firms added staff to meet higher new orders and rising backlogs, while outstanding work increased for the second time in three months. Stocks of finished goods and purchases both fell, even as input buying volumes increased.
Average vendor delivery times rose markedly, with supplier performance worsening at the sharpest rate since June. Companies linked the deterioration to domestic and international port congestion, shipping delays, geopolitical tensions and raw material shortages.
Those disruptions fed into purchasing costs. Input price inflation accelerated for the first time in four months, with companies reporting higher costs for chemicals, electronics, energy and foodstuffs. Firms also cited geopolitical conflicts and rising transportation costs, often connected to higher diesel prices. Average output charges increased in response, and selling prices have now risen for ten consecutive months. Inflation rates for both input costs and output charges were higher at small and medium-sized enterprises than at large-scale producers.
Rob Dobson, director at S&P Global Market Intelligence said: “A disappointing September PMI saw the rate of increase in UK manufacturing production slow further. Output growth was its weakest seen over the past six months, with orders and exports growing only modestly. Slower demand growth was to be expected given the higher energy prices seen during the month.”
“The big shift in September was in the survey’s price measures, which switched from signalling a decline in inflationary pressures to a renewed uplift. After hitting conflict-driven highs earlier in the year, rates of increase in both input costs and factory gate selling prices accelerated for the first time since May. Energy and electronics prices remain especially elevated, while supply disruptions and rising diesel prices are now hitting transportation costs across industry. These price moves will be closely watched by the Bank of England for any signs of a more sustained and broader price uplift potentially taking hold,” added Dobson.
Manufacturers remained broadly optimistic, though confidence softened from August’s six-month high. Forty nine per cent of firms expected output to increase over the next 12 months, citing planned company expansions, new product launches, a hoped-for recovery in market confidence and investment projects. Some companies continued to flag concerns over geopolitical, macroeconomic and domestic policy conditions.
“There are still some positive shoots of growth looking ahead, however, as manufacturers remain generally positive about the outlook. Almost half expect output to rise over the coming year. Confidence nevertheless remains subdued compared to that seen prior to the outbreak of the war in the Middle East, dampened not only by geopolitical issues but also reflecting uncertainty over policy direction at home. The upcoming Budget will therefore likely prove material in steering confidence,” said Dobson.
Fibre2Fashion News Desk (SG)
