03 August 2020

UK manufacturing hits 16-month high – survey

03 August 2020

Furloughed staff returned to work and customers started spending as the UK’s manufacturing sector grew for the second month running in July, according to a closely watched survey.

The IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) hit a score of 53.3 last month, compared to 50.1 in June.

Anything above 50 is considered an improvement for the sector’s outlook.

It is a strong showing for the industry, as the score hit a 16-month high, but it was below the preliminary figure of 53.6 released late last month.

Manufacturers said that the expansion had happened as lockdown restrictions eased in the UK.

Production increased, especially in the consumer and intermediate goods industries.

Rob Dobson, director at IHS Markit said that the sector is on a “much firmer footing” as it goes into the third quarter of the year, as furloughed staff come back onto the production lines.

Despite the solid start to the recovery, the road left to travel remains long and precarious

However, he warned that it would take a long time to reach the pre-crisis levels.

“Despite the solid start to the recovery, the road left to travel remains long and precarious,” Mr Dobson said.

“An extended period of growth is still needed to fully recoup the ground lost in recent months. This is also the case for the labour market, where job losses are continuing despite businesses reopening.

“There is a significant risk of further redundancies and of furloughed workers not returning unless demand and confidence stage more substantial and long-lasting rebounds in the months ahead.”

Steve Harris, head of manufacturing and industrials at Lloyds Bank, said: “It’s encouraging to see growth again after June’s reading barely nudged into positive territory, but the caveat remains that this is a rise from an extremely low base.

“New orders rising shows some momentum is beginning to build behind a wider recovery, and it will be important to sustain this to underpin further growth. However, some stockpiling will be a contributing factor here as firms prepare for the big unknown of possible second waves of coronavirus and also the end of the Brexit transition period in December.”

He added that whereas the position of the sector as a whole might be rosier than it has been in recent months, the car and plane manufacturers are still suffering, something which is a major blow to the economies of the South West, Midlands and the North East.

“While activity at a UK level may look encouraging, it’s harder to gauge the impact in those regions disproportionately exposed to some harder hit sub-sectors of manufacturing,” Mr Harris said.

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