UK manufacturing sector growth picks up in April

by | May 3, 2022

The UK manufacturing sector picked up in April, industry research showed on Tuesday, but confidence tumbled as inflationary pressures continued to mount.
The S&P Global CIPS UK Manufacturing Purchasing Managers’ Index was 55.8 in April, up from 55.2 in March and above both consensus and the flash estimate, of 55.3. The PMI – a weighted average of five sub-indices – has now risen for 23 consecutive months.

Improved production was linked to increased intakes of new business, reduced delivery delays and efforts to clear backlogs.

But while the outlook remained positive, with nearly 55% of companies expecting output to rise over the coming year, the overall degree of confidence tumbled to a 16-month low. Headwinds cited included rising selling prices and lacklustre demand for the European Union due to longer delivery times, custom checks and higher shipping costs post-Brexit. Foreign demand overall was further subdued by the war in Ukraine.

Input costs, meanwhile, rose at the second-strongest pace in the survey’s 30-year history, with around 85% of respondents registering an increase in purchase prices. Input prices were reported to have risen across the broad, including chemicals, energy, freight, metals and timber, among others.

Rob Dobson, director at S&P Global, said: “The improved expansion of output failed to mask the continued headwinds buffeting the sector at the start of the second quarter. New business growth near-stalled, as a slowdown in the domestic market was accompanied by a further deterioration in export orders.

“The inflationary situation is getting increasingly fraught.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “It is difficult to see where ongoing growth will come from in the coming months, as new order growth was the most sluggish in over a year. Higher costs and shortages took a bite out of potential opportunities, with clients hesitating to place orders and Brexit obstacles weighing down as work from overseas shrunk for a third month in a row.”

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: “The small rise in the headline index followed a very sharp drop in March, and largely reflected a rise in the output index, as a previous easing of supply chain disruption enabled firms to work through order backlogs.

“UK exporters are starting to be hit by a drop in demand in key trading partners. Respondents continued to mention that the massive rise in prices, largely explaining the slowdown in demand growth over the past couple of months.

“All told, April’s PMI survey chimes with our view that the recovery in manufacturing output will lose steam in the second half of the year.”

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