UK manufacturing PMI at 26-month high in August

Output, new orders and employment all rose in the UK manufacturing sector in August and there were further signs of price pressures easing, as rates of inflation in input costs and selling prices both slowed.

The seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ IndexTM rose to a 26-month high of 52.5 in August, up from 52.1 in July. The PMI has now signalled expansion in five out of the past six months (the exception being April).

Four of the PMI components stayed at levels consistent with an improvement in operating performance during August – output, new orders, employment and suppliers' delivery times. In contrast, the stocks of purchases component signalled contraction for the twenty-third consecutive month.

Manufacturing production increased for the fourth successive month in August, as companies raised output in response to rising new order intakes and efforts to clear previously agreed contracts. The rate of expansion remained substantial and close to July's near two-and-a-half-year high.

August saw the level of incoming new business also rise for the fourth month in a row. There were reports that better market sentiment and a move away from destocking at clients contributed to higher new work intakes.

However, its the domestic market which is delivering most new contract wins, as new export orders decreased for the thirty-first consecutive month. Companies linked lower intakes of new work from overseas clients to weaker demand from Europe, a slowdown in mainland China, freight delays, competitiveness issues caused by high shipping costs, global conflicts and political uncertainty.

The recent rebounds in output and new order volumes led to job creation at manufacturers. Back-to-back increases in employment have been registered in July and August, with the rate of growth the fastest in over two years during the latest survey month (best since July 2022). Job creation was especially marked at large-scale producers, although small firms also saw a mild increase (cuts were made at medium- sized companies).

Increased capacity aided efforts to make further inroads into clearing backlogs of work. Outstanding business fell for the twenty-eighth month in a row, albeit to the weakest extent during that sequence.