UK factory growth hits two-year high in July

1st Aug 2024 10:17

(Sharecast News) - Production in the UK manufacturing sector grew in July at its fastest pace since February 2022, according to a survey released on Thursday.

The S&P Global manufacturing purchasing managers' index rose to a two-year high of 52.1 in July from 50.9 in June, up from an earlier flash estimate of 51.8.

The PMI has remained above the 50.0 mark that separates contraction from expansion for the last three months, which is the longest sequence signalling growth since mid-2022.

Rob Dobson, director at S&P Global Market Intelligence, said: "UK manufacturing has started the second half of 2024 on an encouragingly solid footing. July saw growth of production and new orders strengthen and staffing levels rise for the first time since September 2022. Hopes for an economic revival and reduced political uncertainty took confidence to one of its highest levels for two-and-a-half years, with 60% of companies surveyed now forecasting output will rise over the coming 12 months. There were also further signs that the trend in new export business is close to stabilising following a prolonged period of decline.

"Inflationary pressures remain a blot on the copybook, however, with input costs rising to the greatest extent in one-and-a-half years. The ongoing Red Sea crisis and associated freight issues are having a severe impact on prices which are then sustaining a focus on cost-caution and cash flow protection at manufacturers. This is leading to cutbacks in purchasing and a drive to leaner inventory holdings.

"Selling prices are also rising at the quickest rate since mid-2023. Policymakers are likely to take a cautious approach to loosing monetary policy amid these signs that inflationary pressures may be pivoting away from services and towards manufacturing."