United Kingdom: Manufacturing sector surges in April
May 2, 2017
The manufacturing IHS Markit/CIPS Purchasing Managers’ Index (PMI) soared from 54.2 points in March to 57.3 points in April, marking a three-year high and flummoxing analysts, who had expected a slight decline. The index remains comfortably above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for nine consecutive months.
April’s notable uptick was driven by faster growth in output and new orders, underpinned by buoyant business confidence. Firms enjoyed healthy domestic demand, while exports also grew thanks to a weak sterling and improved external conditions, with the U.S., Brazil, Africa and Europe purchasing more British goods. In response to the fairly balmy economic scenario, businesses ramped up hiring efforts in April. Input costs continued to rise at a significant rate, although price pressures have abated somewhat from January’s high, and firms consequently raised output charges.
According to Rob Dobson, Senior Economist at IHS Markit, “the upturn in the manufacturing sector represents some welcome good news […]. 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. If this happens again it will inevitably constrain manufacturing.”
Author: Oliver Reynolds, Economist