UK manufacturers are showing resilience, with production accelerating at the fastest pace in two years while firms have been increasing prices in response to cost pressures such as fuel and energy, a new survey suggests.
The S&P Global UK manufacturing PMI survey, closely watched by economists, showed a reading of 52.8 in October, up from 51.9 in September. Any reading above 50.0 indicates activity is growing, while a score below means it is contracting. October's reading means overall activity in the manufacturing industry has been growing for a year.
Stronger demand and new business
The pace of factory production rose to a 25-month high in October. Manufacturing firms reported stronger levels of new business and improved demand from both domestic and overseas clients, including China, the EU and the US.
Rob Dobson, director at S&P Global Market Intelligence, said manufacturing firms "showed resilience in the lead up to the autumn Budget". However, he pointed out that the industry may face increased pressure from the planned rise in the national minimum wage from April, which was confirmed in last week's Budget.
Rising costs and delivery delays
"As well as higher wage costs, manufacturers are being buffeted by rising fuel, energy and transportation costs as supply-chain shocks and delays continued to drive up inflationary pressures," he said.
The PMI survey showed that input costs – the price of materials and components bought in by manufacturers – have been increasing for almost three years and rose at the sharpest pace last month since the spring. Firms said part of this increase had been passed onto clients in the form of higher selling prices.
Supply chain disruptions persist
Manufacturers also continued to experience longer delivery times because of the impact of shipping being re-routed, congestion at ports, material shortages and ongoing disruption to key transport routes caused by global conflict. Some said extended delivery times were becoming the norm, the survey found.
