UK manufacturing activity expanded at a slightly faster pace in September, while input costs and selling prices accelerated for the first time in four months, according to the latest S&P Global survey.
The UK Manufacturing Purchasing Managers’ Index rose to 51.9 in September from 51.7 in August, remaining above the 50 level that separates expansion from contraction for an 11th consecutive month.
Factory output continued to increase but recorded its slowest growth in six months as higher energy costs affected demand.
Input Costs and Selling Prices Accelerate
Input cost inflation increased for the first time since May, with manufacturers reporting higher prices for chemicals, electronics, energy and food.
Transport expenses also increased, partly reflecting higher diesel prices. Manufacturers passed some of the additional costs on to customers, with selling prices rising at a faster rate during September and extending their sequence of monthly increases to 10 months.
Price pressures were stronger among small and medium-sized manufacturers than among larger companies.
“The big shift in September” was the renewed acceleration in input costs and factory-gate prices, said Rob Dobson, director at S&P Global Market Intelligence.
The figures provide further information for the Bank of England as it assesses the extent to which higher energy and transport costs are feeding into broader inflation.
New Orders Rise for Tenth Consecutive Month
Supply chains remained under pressure, with supplier delivery times lengthening during September. Manufacturers cited port congestion, shipping delays, geopolitical tensions and shortages of raw materials.
Demand indicators were more positive. New orders increased for a tenth consecutive month and grew at a faster pace than in August.
New business increased in both domestic and export markets, with manufacturers reporting higher demand from markets including the United States, Asia-Pacific, Brazil and Australia.
Employment increased for a sixth consecutive month, with the pace of hiring close to the two-year high recorded in August as companies responded to higher orders and growing backlogs.
Performance Varies Across Manufacturing Sector
Conditions differed across manufacturing categories and company sizes. Investment goods production recorded its fastest growth since late 2017, while output of consumer and intermediate goods declined.
Small manufacturers reported declines in production and new orders, while medium-sized and large companies continued to expand.
Around 49% of manufacturers expect output to increase over the next 12 months. Companies cited expansion plans and new product launches while also identifying geopolitical risks, economic uncertainty and domestic policy issues as factors affecting the outlook.
The survey was based on responses from around 650 manufacturers collected between September 10 and 25. Dobson also said the upcoming UK government Budget could have a material effect on the sector’s outlook.
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