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Manufacturing bounce back continues apace

Manufacturing production in the UK expanded at the fastest rate for over six years during August, with companies reporting a rush of new orders as clients continue to re-open.

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The monthly UK Manufacturing Purchasing Managers’ Index (PMI) reached 55.2 in August, which is the highest score since May 2014 and marks three consecutive months of growth for the sector.

The expansion in output was experienced across the board in consumer, intermediate and investment goods. New orders also increased at the fastest rate since November 2017, driven primarily by rising demand in the domestic market as manufacturers and their clients continued to re-open after lockdown. Export orders also rose slightly for the first time in nearly a year.

The positive figures suggest the sector may be facing a ‘V’ shaped recovery, although experts are warning a ‘surge-then-slump’ scenario may occur as backlogs of work dry up.

Commenting on the survey findings, Fhaheen Khan, Economist at Make UK, said:

“Following shocking declines in output during the most difficult moments of lockdown, unsurprisingly the UK manufacturing PMI has been in expansion territory for the third month running. A mixture of new orders, and old orders, have resulted in increased output as firms across the nation have reported the easing of lockdown measures, combined with consumer-led consumption policies, have helped to restart supply chains.

Indeed, this highlights the sector’s role as the most likely candidate to lead the UK’s economic recovery whilst facing one of its deepest recessions on record.

Yet, a number of concerns that may hinder that recovery remains and that this honeymoon period for above average growth may be short-lived. Particularly, as the Job Retention Scheme expires at the end of October, Make UK’s most recent data already indicate job losses are picking up as firms are shedding weight in order to cut costs.”

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