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Wednesday, June 19, 2024

Manufacturing sector in the UK has rebounded in May, marking a return to growth

In May of this year, the UK manufacturing sector experienced a resurgence, with output expanding at its fastest pace in over two years, fueled by increased intake of new work. According to S&P Global, positive sentiment among manufacturers also reached its highest level since early 2022, with 63% of companies anticipating output growth in the coming year.

The S&P Global UK manufacturing purchasing managers’ index (PMI) rose to 51.2 in May, up from April’s 49.1, marking its highest reading since July 2022, just slightly below the earlier estimate of 51.3.

Notably, manufacturing production in May expanded at the swiftest rate since April 2022, with growth observed across all sectors and company sizes. All three product categories surveyed—consumer, intermediate, and investment goods—as well as all size definitions—small, medium, and large—simultaneously reported expansions for the first time in over two years.

Increased intake of new work, improved market conditions, and efforts to fulfill existing contracts underpinned the growth in output. New business orders placed with UK manufacturers rose for the second time in three months, reaching levels not seen since April 2022, primarily driven by domestic demand as new export orders continued to decline for the twenty-eighth consecutive month.

Despite the overall optimism, some firms expressed concerns regarding political and economic uncertainties both domestically and internationally. However, hopes for sustained economic recovery, promotional activities, and improved export orders fueled positive sentiment for future growth prospects.

Operational efficiency, cost management, and lean production remained key considerations for manufacturers in decision-making during May. Employment continued to decline for the twentieth consecutive month, while inventories of finished goods and purchases were depleted.

Input buying saw a slight increase in May, ending a 22-month trend of reduced purchasing activity. Suppliers’ delivery times lengthened for the fifth consecutive month, primarily due to transportation issues such as those stemming from the ongoing crisis in the Red Sea.

Average input costs rose for the fifth successive month in May, though to a lesser extent than in April.

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