With the Conservative Party conference taking place last week, we’ve heard a lot about Brexit. First of all, we now know the date which we’ll have triggered Article 50 by (March 2017). That shockwave sent the value of the pound to its lowest level in 31 years, but it did push the FTSE up to a near-record high. We’ve also had much talk about the way a post-Brexit, Theresa May led country will look.
What we haven’t heard much about, however, has been manufacturing. Nevertheless, like we do best in this sector, we’ve just been getting on with the task at hand. The result? The fastest growth in UK manufacturing activity in more than two years.
The Markit/CIPS purchasing managers’ index (PMI) for manufacturing in September rose to 55.4 during the month, up from 53.4 seen in August. Any figure above 50 indicates growth in the sector, showing fine progress.
Economists have said that the better than expected performance has strengthened the case for the Bank of England to keep their interest rates on hold during November, as several bodies have upgraded their UK growth forecasts.
Of particular note is that the growth was broad based, touching on all manufacturing areas, from cars to JIC fittings and SAE adapters. Indeed, more good news came in the news that for the second straight month, employment in the sector rose.
The long term trend in manufacturing employment has been overwhelmingly negative, so an uptick in employment numbers comes as great relief.
Rob Dobson, the senior economist at Markit, said the positive PMI reading suggested the sector was also on course to add to UK growth in the third quarter, adding: "The weak sterling exchange rate remained the prime growth engine, driving higher new orders from Asia, Europe, the USA and a number of emerging markets”
However, it’s not all good news for the sector. Though the value of the pound has meant that orders from overseas have picked up strongly, it’s also had a dramatic effect on the everyday running costs of UK manufacturers. Indeed, analysis has found that running costs for businesses has risen by a “double digit annual rate”.
Nevertheless, economists are delighted with these latest results. Howard Archer, chief UK and European economist at HIS Global Insight, described the figures as “a serious and very welcome upward surprise” which was “undeniably encouraging” for the economy. "The robust September manufacturing purchasing survey seemingly further dilutes the case for the Bank of England to cut interest rates again this year," he added.
This will all be good news for the new chancellor, Phillip Hammond. His autumn statement is just around the corner, and it’s expected to explain how the UK’s economy will survive amid the turmoil that our exit from the European Union is certain to bring. In those circumstances, he’s going to be delighted to have any positive growth in the economy.