UK manufacturing growth accelerated unexpectedly in April, a survey has shown.
The Chartered Institute of Procurement & Supply’s latest survey also signals companies are stocking up on raw materials to protect themselves against future price rises, in an inflationary environment. Sterling weakness since the Brexit vote has pushed up raw material costs.
CIPS’s purchasing managers’ index for UK manufacturing, a composite measure of changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased, rose from 54.2 in March to a three-year high of 57.3 in April on a seasonally-adjusted basis. Economists had forecast a reading of 54. Readings above 50 signal expansion.
The manufacturing output index jumped from 53.5 in March to a three-month high of 58.4 in April.
And growth in new orders accelerated to the fastest pace since January 2014. New export orders were boosted by sterling weakness. Growth of manufacturers’ overall employment eased slightly.
The stocks of purchases index leapt from 50.2 in March to 55.1 in April, signalling the fastest increase since comparable records began in January 1992. CIPS noted April had seen “increased reports of companies purchasing and holding inputs in order to guard against future price increases”.
Office for National Statistics data last week showed UK gross domestic product growth more than halved to 0.3 per cent quarter-on-quarter in the opening three months of this year, as surging inflation put pressure on consumer spending.
Rob Dobson, senior economist at CIPS survey compiler IHS Markit, said: “Although only accounting for 10 per cent of the economy, the upturn in the manufacturing sector represents some welcome good news after the sharp slowing in GDP [growth] in the first quarter.”
He added: “The big question is whether this growth spurt can be maintained, especially given the backdrop of ongoing market volatility and a number of political headwinds such as elections at home and abroad. Other surges seen since the middle of last year have generally proved short-lived, as weak wage growth sapped consumer spending.”
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