Key facts
- UK manufacturing output increased in July at the fastest pace in nearly two years.
- The S&P Global PMI for UK manufacturing fell to 51.9 in July, indicating continued expansion.
- Rising new orders from domestic and export clients are driving production increases.
- Improvements in global supply chains have been noted.
- Employment growth in the manufacturing sector has slowed significantly.
- Concerns persist regarding potential disruptions to oil and gas supplies due to Middle East conflict.
UK manufacturers ramped up production in July for the fourth consecutive month, achieving the fastest pace in nearly two years, according to an S&P Global survey. The purchasing managers' index (PMI) for the sector dipped slightly to 51.9 from 52.5 in June, but remained above the 50 mark, signifying expansion for the ninth month in a row.
The increase in output is attributed to rising new business from both domestic and export clients, with some companies noting an improvement in global supply chains. New export orders were reported from the US, Canada, the EU, China, India, and South Korea.
Despite the production growth, employment levels saw only a marginal increase, with the rate of growth slowing to near-stagnation due to uncertainty about the future. Manufacturers expressed anxiety about the ongoing conflict in the Middle East, fearing potential disruptions to oil and gas supplies and increased production costs.
Rob Dobson of S&P Global Market Intelligence noted that while growth in output and new orders accelerated, the subdued business optimism might hinder further hiring. He suggested that progress in geopolitics, global trade, and industrial policies could aid the sector. Ginni Cooper from MHA highlighted the sector's resilience to fluctuating commodity prices, including oil and gas.
However, Matt Swannell of The Item Club offered a more cautious outlook, anticipating a difficult second half of the year. He cited the Middle East conflict as a key wildcard, potentially leading to higher energy prices, increased business costs, and reduced demand due to inflation and weakening wage growth.