UK manufacturing sector witnesses further solid growth at end of third quarter

The UK manufacturing sector continued to expand at a solid clip during September, with production and new orders both rising at above long-run average rates. However, the latest survey signaled that cost inflationary pressures surged higher. This reflected a combination of rising commodity prices, the exchange rate, and increased supply-chain pressures.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI)  registered 55.9 in September, down from August’s four-month high of 56.7, but above its long-run average of 51.7. Data included in the latest PMI report were collected between 12-26 September.

Where an increase in output was registered, this was mainly due to rising intakes of new business. Although the latest gain in new orders was slower than the prior survey month, companies reported that demand remained solid in both domestic and overseas markets.

The growth of new export business remained among the best registered over the past six-and-a-half years. There were reports of increased sales to Europe, the USA, China, and Brazil. Some firms also mentioned an ongoing boost from the historical weakness of sterling, although this was less prominent as a factor than earlier in the year.

"On balance, the continued solid progress of manufacturing and export growth is unlikely to offset concerns about a wider economic slowdown, but the upward march of price pressures will add to expectations that the Bank of England may soon decide that the inflation outlook warrants a rate hike," said Rob Dobson, Director at IHS Markit.

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