The UK manufacturing sector showed solid growth in September, continuing its upward trend in output and new orders, although at a slower pace than in August.
The domestic market remains the key driver of this expansion. However, rising uncertainty, partly due to the upcoming Autumn Statement, led to a decline in business optimism to a nine-month low. Despite challenges in exports and rising input costs, manufacturers remain cautiously optimistic, with new projects and product launches planned for the future.
We provide a summary of the key points from S&P Global UK Manufacturing Purchasing Managers’ Index™ (PMI®) below:
Key Points:
Continued Expansion: The seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index™ (PMI®) posted 51.5 in September, down from August's 26-month high of 52.5 and unchanged from the earlier flash estimate. The PMI has remained above the neutral 50.0 mark for five successive months.
Domestic Market Strength: Growth was primarily driven by the domestic market, with both output and new orders increasing. The consumer and intermediate goods sectors saw stronger gains, while the investment goods sector contracted.
Uncertainty Ahead: Business confidence fell sharply to a nine-month low due to uncertainties surrounding government policy and global market conditions. The Future Output Index dropped by 7.5 points, the second-largest drop since March 2020.
Export Challenges: UK manufacturers faced a 32nd consecutive month of declining export business, citing weakened demand from key European markets, particularly France and Germany, and lower orders from the U.S.
Rising Costs: Average input prices rose at the fastest rate since January 2023, driven by higher freight costs and supply chain disruptions, especially around the Red Sea. Some of these costs were passed on to clients through increased selling prices.
Employment Declines: Manufacturing employment dropped in September, reflecting cost-reduction strategies amidst rising uncertainty. Companies also reduced purchasing activity and stock levels.
Key Concerns: The forthcoming Autumn Statement is expected to shape manufacturers’ outlook, particularly in areas like industrial strategy, minimum wage increases, and potential new policies affecting the sector.
Eurozone Struggles: In contrast, Eurozone manufacturing continued to struggle, with the HCOB Eurozone Manufacturing PMI falling to 45.0, marking the steepest decline this year.
Industry Reactions: Industry experts noted that while the sector is on a path to recovery, growth is slowing. Many emphasise the need for long-term industrial strategies and investments in technologies like AI to enhance productivity and relieve cost pressures.
Source: S&P Global Manufacturing PMI, September 2024 report.
