Manufacturing activity becomes fastest due to new orders and output

Thursday, 06 Feb, 2020

"The start of 2020 saw the performance of the United Kingdom manufacturing sector stabilise, as receding levels of political uncertainty following the general election aided mild recoveries in new order intakes, employment and business confidence", said IHS Markit director Rob Dobson.

The Markit/Caixin survey features more smaller firms, while the official PMI survey typically polls a large proportion of big businesses and state-owned enterprises.

Britain's manufacturing sector performed steadily in January as the purchasing managers' index (PMI) for the manufacturing sector stood at 50.0 amid receding political uncertainty in December 2019, said a report published Monday.

The PMI aims to gauge the health of the manufacturing industry, with results above 50 indicating expansion and scores below the threshold suggestion contraction.

IHS Markit said companies noted the strongest upturn in new business intakes for over five years, which they attributed to better underlying demand and greater client requirements.

The manufacturing sector has been a worry as it has remained sluggish for a long time.

Tim Moore, economics associate director at survey compiler IHS Markit, said: "The construction sector downturn lost intensity in January amid slower reductions in house building, commercial work and civil engineering activity". However, the improvement in new order books was only modest, with survey respondents often citing subdued customer demand and weaker export sales. Improved confidence reflected reduced political uncertainty, higher demand, an expected recovery in export volumes and planned new product launches.

Markit Manufacturing PMI (final) fell to 51.9 in January.

However, subcontractor availability improved for the first time since last September and at the fastest pace for three and a half years. "If this is sustained, sales growth could strengthen further this year", Owen, for his part, acknowledged.

At the same time, planned production line expansions contributed to a further increase in payrolls, although the job-creation rate eased compared with December previous year, the survey showed.

Meanwhile, selling charges also rose at a quicker pace last month as manufacturers raised their charges amid higher prices of raw materials, including oil and foodstuff. The latest fall in input buying was the sharpest since December 2015.

Optimism among construction firms rose its highest level since April 2018 last month as the dust settled on the election and uncertainty receded further, with client demand having increased "widely".

With input costs increasing, firms raised output prices.