UK manufacturing achieves its fastest growth in almost two years.
- Factory output reaches PMI score of 51.2, surpassing the growth-contraction threshold, signalling economic stabilisation.
- Demand for consumer, intermediate, and investment goods rises, driven by a broad-based recovery across all sectors.
- Persistent inflationary pressures challenge manufacturers, leading to the fastest rate of factory gate price increases in a year.
- Despite a decline in new overseas orders and a 20-month contraction in employment, optimism in the sector is at a 27-month high.
The UK manufacturing sector has reported its fastest growth in nearly two years, according to the latest PMI survey by S&P Global and CIPS. The PMI rose to 51.2 in May, up from 49.1 in April, surpassing the critical 50-point threshold that differentiates growth from contraction. Although revised down slightly from an initial estimate of 51.3, this figure represents the highest level since July 2022.
Experts have observed a widespread increase in activity, reflecting a rising demand for consumer goods, equipment, and investment assets amidst stabilising economic conditions. Rob Dobson, director at S&P Global Market Intelligence, noted, “The breadth of the recovery is positive, with concurrent growth in output and new orders across all main sub-industries and company sizes for the first time in over two years.”
Manufacturers are navigating significant challenges due to rising interest rates both in the UK and globally. The increased cost of borrowing impacts businesses that finance the purchase of manufactured goods through loans. Rob Wood, chief UK economist at Pantheon Macroeconomics, commented, “Manufacturing output has decisively exited its long recession.”
Inflationary pressures remain a concern, with product prices at factories increasing at the fastest rate in a year. The PMI survey highlights that the most significant price hikes occurred in the consumer and intermediate goods sectors. Input price inflation—tracking the rate of change in business operating costs—rose for the fifth consecutive month, although at a slower pace than in April. Dobson added, “The latest PMI survey data presents a mixed picture for price pressures at manufacturers. At the factory gate, output charge inflation strengthened for the fifth consecutive month, reaching its highest level in a year. However, a solid easing in the rate of input cost increases should help prevent these price pressures from becoming entrenched.”
Despite a reduction in new orders from international businesses, particularly from the United States, Germany, and the Middle East, confidence within the sector remains robust. Employment levels in manufacturing have been declining for a consecutive 20 months, yet optimism rose to a 27-month high.
The UK manufacturing sector demonstrates resilience and growth potential amidst economic challenges.
