U.K. manufacturing activity growth continued at the end of the second quarter as output and new orders both expanded for the second straight month, remaining close to May’s highs. The manufacturing sector saw a modest increase in cost inflationary pressures, with input prices rising the fastest since January 2023.
The seasonally adjusted S&P Global U.K. Manufacturing Purchasing Managers’ Index (PMI) recorded 50.9 in June, down slightly from May’s 22-month high of 51.2 and below the earlier flash estimate of 51.4. The PMI has posted above the neutral 50.0 mark, signaling expansion in the last two months.
U.K. production volumes rise
The U.K. manufacturing sector saw an increase in production volumes for the second month in a row in June as companies reacted to rising intakes of new orders and ongoing efforts to clear backlogs of work. The rate of the sector’s output growth was solid and only slightly below the 25-month high in May.
“The UK manufacturing sector is enjoying its strongest spell of growth for over two years, with June seeing output and new order growth sustained at robust rates similar to May’s recent highs,” stated Rob Dobson, director at S&P Global Market Intelligence.
New business intakes rose for the third time in the last four months as new orders rose on greater demand, market activity, and product promotions. Both consumer and investment goods producers saw gains in June.
Price pressures persist
June saw average purchase prices rise for the sixth consecutive month and at the quickest pace since January 2023. The U.K. manufacturing sector continued to report a wide range of increases in the prices of inputs including energy, food, metals, packaging, paper, plastics, and timber.
Tight supply lines, higher import costs, and freight issues also contributed to higher purchase prices. This increase in costs led to higher selling prices, which rose for the eighth consecutive month.
“This renewed upward lurch in manufacturing prices will likely add to concerns over the potential stubbornness of underlying inflationary pressures among hawkish rate setters at the Bank of England,” added Dobson.
Inflows of new work from overseas decline
The U.K. domestic market drove new business across the manufacturing sector as inflows of new work from overseas declined for the 29th month in a row. PMI reported lower intakes from clients in North America, China, Germany, France, Italy, Sweden, the Middle East, and Poland. The report attributes this decline to shipping delays and rising freight costs as a result of the Red Sea crisis.
“The performance of the domestic market remains a real positive, providing a ripe source of new contract wins. In contrast, the ongoing weak export performance is concerning, with manufacturers reporting difficulties in securing new business in several key markets including the US, China, and mainland Europe,” added Dobson.
Read: Germany’s unemployment rate rises to 6 percent in June
Future outlook positive
The U.K. manufacturing sector maintained a positive outlook in June, reflecting expectations for a market recovery, upcoming growth strategies, new product launches, and promotional activities. Optimism remained close to May’s 27-month high, with 57 percent of firms in the U.K. manufacturing sector expecting output to rise over the coming year. Some firms noted feeling uncertain due to the forthcoming general election, while others expected this to reduce following its conclusion.
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