UK’s manufacturing sector improves modestly in June, PMI at five-month high

UK’s manufacturing sector’s performance improved modestly in June. The seasonally adjusted Markit/CIPS PMI Index rose to 52.1 in June from May’s 50.4. The latest reading is the highest since January 2016. The data in June has hinted at a rapid pace of rise in UK’s manufacturing production, supported by a strong acceleration in new work inflows.

New orders grew at the most rapid rate since October 2015. This shows the strength of domestic market and a slight rebound in new export business. Rise in new work from abroad was attributed to higher sales to the US, Russia, mainland Europe and East Asia.

Sector data indicated towards a wide-based recovery in operating conditions in June. New orders and output rose throughout consumer, investment and intermediate goods industries. Only investment goods failed to record gains in new export business.

Meanwhile, trend in employment in manufacturing continued to be negative in June. For the sixth consecutive month, manufacturing firms reported job losses. Cutting of staff levels was linked to a mixture of natural wastage, redundancies, efficiency gains and efforts to control costs, noted Markit.

Today’s data hinted at a modest rise in UK manufacturers’ purchasing activity, halting a four straight month sequence of decline. This put pressure on suppliers’ capacity, resulting in additional lengthening of vendor lead times. Stocks of finished and purchased goods both dropped. An increase in average input costs was seen for the second straight month in June.

Even if inflation rate was just moderate and much below its long-run trend pace, it was still the most rapid since February 2014. Moreover, June registered a slight rise in selling prices as manufacturers passed on higher costs. Output charges also increased at a similar pace throughout the intermediate, consumer and investment goods sectors.