UK Manufacturing Continues To Recover From Covid-19 Slump

The UK manufacturing sector continued its recovery from the coronavirus-induced economic slump in September, but the pace of growth was slightly less than initially estimated, survey data from IHS Markit showed on Thursday.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index for manufacturing fell slightly to 54.1 from August’s two-and-a-half year high of 55.2.

A reading above 50 suggest growth in the sector and the score has remained above that level for four months in a row, marking the longest sequence in expansion territory since early-2019.

Output grew for a fourth successive month, but at a slower pace, amid increased inflow of new work, companies reopening and staff returning to work. The growth was led by large manufacturers.

Intermediate goods industry registered the strongest expansion in September. Consumer and investment goods sectors also reported increase in output.

The survey data was collected from September 11 to 25.

New orders grew for a third month in a row, albeit at a slightly slower rate, driven by improving customer demand, rising export orders and signs of recovery in the retail trade and schools reopening.

Export demand rose for the second successive month to reach a 21-month high, driven by stronger demand from Europe, Asia and North America.

Manufacturers shed jobs for an eighth consecutive month, but the pace of reduction was the slowest since February. Redundancy programs were implemented in some firms, while a fall in work-in-hand suggested sufficient capacity to meet demand.

Companies raised selling prices agains as Input cost inflation accelerated to a 21-month high in September, thanks to higher raw material costs, rising competition and demand for inputs and the resulting supply shortages.

Drawing confidence from the continued recovery, manufacturers remained positive for the year ahead with 60 percent expecting output growth in 12 months.

The overall degree of confidence remained close to July’s 28-month high, while there were also increased numbers of firms noting uncertainty about the path ahead, particularly regarding COVID-19 and Brexit, the survey found.

“While the sector is still making positive strides, keep in mind that there remain considerable challenges ahead,” IHS Markit Director Rob Dobson said.

“The full economic cost incurred by 2020 will likely rise further as governments look to re-introduce some restrictions, job support schemes are tapered and rising numbers of firms start focusing on Brexit as a further cause of uncertainty and disruption during the remainder of the year,” Dobson added.

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