UK manufacturing growth eases in November as costs rise

Growth in the UK manufacturing sector unexpectedly eased November as the weak pound continued to drive up price pressures at manufacturers.

The Markit/CIPS manufacturing purchasing managers’ index fell to 53.4 in November from 54.2 the month before and a 27-month high of 55.4 in September, missing expectations for a reading of 54.5.

Markit said the weak sterling exchange rate continued to be felt by manufacturers, but on the plus side, the boost to export competitiveness led to a further increase in new business from abroad, with companies reporting improved demand from the US, mainland Europe and the Middle East.

The weak pound was felt on the cost side, as average purchase prices rose at a pace close to October’s near six-year record and again at one of the fastest rates in the survey history, with 84% of manufacturers making reference to the exchange rate as a reason for the increase in costs.

New orders growth slowed to a four-month low but was still above average levels, while export orders also slowed to a four-month low but were still relatively elevated.

Rob Dobson, senior economist at IHS Markit, said: “The latest PMI indicates that the UK manufacturing sector remained in good health during November. Although the recent growth spurt showed further signs of slowing, the pace of expansion is still solid and above its long-term trend. This should be sufficient to ensure manufacturing is a positive contributor to fourth quarter GDP.

“Scratching beneath the surface of the data shows that rising consumer demand and business-to business spending is helping manufacturing to grow at a robust clip. However, the trend in new orders for investment goods such as plant and machinery has eased sharply so far in the fourth quarter, and will need to improve if investment is to continue to contribute positively to economic growth.”

Howard Archer, chief UK and European economist at IHS Global Insight, said this was a “weaker but still pretty decent survey that suggests that the manufacturing sector can contribute to UK GDP growth in the fourth quarter”.