Engineering news
The IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to 56.7 in May, from April’s three-year high of 57.3, and was an improvement in operating conditions for the tenth successive month.
Production and new orders both expanded at above survey average rates, with companies benefitting most from the continued strength of the domestic market, the statistics revealed.
However, there was also a solid increase in new export business due to a combination of the historically weak sterling exchange rate and manufacturers’ efforts to promote and launch new products in foreign markets.
“While not quite hitting the heights of April’s rebound in activity, the manufacturing sector didn’t disappoint with a sustained rise in purchasing activity, output and new orders, optimism at a 20-month high, and storming ahead unfazed by the looming election,” said Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply.
“The domestic market persisted as the driving force, but the weak pound’s continuing bounty meant levels of export orders also increased, for the thirteenth month, as export markets made use of the competitiveness of UK firms.”
The continuing growth in the sector had a positive impact on both business sentiment and job creation, the PMI found. Optimism regarding the outlook for production levels in one year’s time improved to a 20-month high, with 56% of manufacturers forecasting output to rise during the next 12 months.
Employment in the sector rose for the tenth consecutive month in May, with the rate of jobs growth the fastest since June 2014.
“The latest Manufacturing PMI figures broadly reflect what we are seeing at Alucast in the first six months of 2017,” Tony Sartorius at West Mindlands-based manufacturer Alucast told PE.
“We are up 12.5% year-on-year in sales, which is a healthy increase and a direct result of a concerted drive to secure new work last year. Tooling has been made, parts developed and now we are benefiting on the bottom line from these new orders.”
However, Sartorius said it’s important for companies to keep moving. To this extent, the company has invested in the latest casting simulation software and five-axis CNC machining technology.
The survey found that rates of inflation in input costs and output charges remained elevated in May, despite easing further from recent highs. Increased costs reflected the historically weak sterling exchange rate and rising raw material prices.
“Manufacturers are continuing to take advantage of the low value of sterling and creating new relationships in existing and emerging markets, with many using this opportunity to build on Britain’s reputation for world-class, quality manufacturing,” said UK head of manufacturing at Lloyds Bank Commercial Banking Dave Atkinson.
“At home, there are more challenges as firms are facing inflationary pressures and a slow-down in consumer spending. Many are responding by implementing price rises and our Working Capital Index shows that the sector has been buying stock at the fastest rate in six years as a hedge against rising import costs.”
Justin Benson, a director in KPMG’s manufacturing practice, said that British industry is clearly taking advantage of the weaker sterling whether it be in EU or global markets. “The global economy is growing and British manufacturers can go into the next 12 months with confidence, taking advantage of the market opportunities and demonstrating continued resilience.
“Brexit negotiations start later this month and manufacturers across the country will be ready to respond to change as they always do. However, politicians and negotiators must ensure that maintaining a healthy trade environment for British manufacturing and engineering businesses is high on their agenda.”