UK manufacturing output expanded for the first time in a year during October, as companies depleted backlogs of work, increased stocks and, in some cases, were boosted by a restarting of production at JLR following a recent cyber- attack.
The seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) rose to a 12-month high of 49.7 in October, up from 46.2 in September.
Three of the PMI constituents (new orders, employment and stocks of purchases) registered contractions, while sub-indices for output and suppliers' delivery times were at levels consistent with improved operating conditions.
Sector data signalled that production volumes rose in the consumer and intermediate goods industries. Growth was stronger in the latter, partly reflecting a boost to some manufacturers (mainly those sensitive to the autos supply chain) from the staged restarting of production at JLR (Jaguar Land Rover).
Although investment goods output contracted for the twelfth successive month, the rate of decline was the weakest during that sequence.
Market conditions faced by manufacturers remained tough, however, with demand from both domestic and overseas markets decreasing during the latest survey month. October saw total new business contract for the thirteenth month in a row, albeit to a weaker extent than in the prior month.
Rob Dobson, Director at S&P Global Market Intelligence “The October PMI survey shows UK manufacturing production rising for the first time in a year, which is a positive in itself. However, there are real concerns that the bounce could prove short-lived. Not only did October see auto sector supply chains benefit from the production restart at JLR, which will provide only a temporary spike in production, but sluggish demand from both domestic and overseas markets meant October’s output growth was dependent on firms eating into backlogs of orders placed in prior months and allowing unsold stock to accumulate.
"There are also concerns the forthcoming Budget will exacerbate the lingering challenges created by last year’s Budget, especially in relation the impact of NMW and employer NICs on costs, demand and production. This means that business optimism remains below its long-run average despite rising to an eight-month high in October.
“Manufacturers seem to be stuck in a holding pattern until the domestic policy and geopolitical backdrops exhibit greater clarity.”
