Manufacturing PMI shows solid foundations for future growth
Commenting on the latest CIPS UK Manufacturing Purchasing Managers’ Index, which remained stable at 51.9 for July, down from 52.5 in June, Mike Thornton, Head of Industrials at RSM UK, said: “Optimism across UK manufacturing is solid as momentum continues to hold in the face of geopolitical volatility. While the impact of the most recent tensions in the Middle East is yet to hit the data, the uptick in new orders, export orders and future output index for July offers a strong foundation for continued resilience and long-term growth.
“Input prices have ticked down substantially to 65.9, easing margins, as strong demand and stable output prices demonstrates that businesses maintained the ability to pass on additional costs. However, with renewed global tensions once again spiking oil prices, supply chain disruptions and inflationary pressures remain a key concern, which could undermine optimism and slow down growth in the short-term.
“Looking ahead, Andy Burnham’s appointment as Prime Minister has sparked new questions around how government policy might support long-term growth efforts. Plans for re-industrialisation and regional growth could offer a welcome boost to manufacturers, alongside proposed investment in defence. Although greater clarity and funding commitment is needed to facilitate investment decisions and stimulate the market.”
Thomas Pugh, chief economist at RSM UK, said: “The further improvement in the manufacturing PMI is evidence that the current resurgence is about more than just restocking ahead of disruptions from the Iran war. Indeed, the manufacturing sector has grown roughly twice as fast as the rest of the economy since last summer and the PMI suggests that improvement will continue through this summer.
“Admittedly, the second half of the year could be tougher. Energy prices are rising again and, with stock of natural gas near their 10-year minimum, the potential for further price rises is obvious. Inflation will also rebound, weighing on household real incomes and crimping demand for consumer goods. However, underlying demand should be resilient as AI investment continues and defence spending across the world ramps up. For Andy Burnham, the challenge is following up on big ideas of stronger defence spending and reindustrialisation with tangible policies that will boost growth.”