PMI posts its second-highest reading in 40 months

Strong growth of output, new orders and jobs in June round off robust second quarter for UK manufacturing.

Overview:

• Manufacturing PMI at 57.5 in June 
  
• Order inflows strengthen as demand improves in domestic and export markets 
  
• Job creation at 39-month high, led by rising SME headcounts 
  

At 57.5 in June, up from 57.0 in May, the headline seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) posted its second-highest reading in 40 months, bettered only during this period by last November’s 57.8. The PMI has now signalled expansion throughout the past 16 months. Furthermore, the average index reading during the second quarter is the highest since Q1 2011. 

Manufacturing output increased for the sixteenth successive month in June. Although the rate of growth eased to a three-month low, it stayed elevated and sufficient to ensure the average pace over the second quarter as a whole was the strongest for 20 years. The latest survey saw robust production growth maintained across the consumer, intermediate and investment goods sectors. 

The level of incoming new business rose at the fastest pace since November 2013 and to one of the greatest extents since the survey began in 1992. The domestic market remained the prime source of new contract wins, although inflows of new export business also strengthened. 

Manufacturing employment rose for the fourteenth successive month in June, as improved inflows of new business and increased production encouraged firms to expand capacity. The steepest rate of job creation was registered by SMEs, although large-scale producers also reported a solid increase to payroll numbers. 

Price pressures rose during June, as average input costs increased for the first time since January and selling price inflation picked up. 

The increase in purchase prices was centred on the intermediate goods sector. Some firms linked this to shortages of certain raw materials, a factor further highlighted by a sharp lengthening in supplier lead times. In contrast, input costs fell at manufacturers of consumer and investment goods.