The pound rose to a near five-year high against the dollar yesterday (May 1) after the Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) jumped to 57.3 from a revised 55.8 in March.
Manufacturing, which accounts for around 10 per cent of the UK economy, managed to maintain its strong start to the year, with actual expansion outpacing expectations of 55.4. Readings above 50 denote growth.
According to the survey, there were improvements across the consumer, intermediate and investment goods sectors and firms have been working flat out to meet the increase in new order inflows, new product launches and efforts to clear backlogs of work, taking output to an eight-month high.
Growth in new orders was attributed to improved demand from both domestic and export markets. The level of new businesses from overseas rose for the thirteenth month in a row, with stronger inflows from North America, Europe, Asia and the Middle East.
The sector’s strong performance also resulted in more job creation, with employment climbing for the twelfth consecutive month. Meanwhile, average purchase prices fell, thanks to a decline in metal costs and successful negotiations by suppliers.
However, one less than encouraging result from the survey was a significant slowdown in demand for investment goods, which may raise concerns that business investment may not rise robustly enough to help the economy rebalance away from its reliance on consumer spending.
That said, looking ahead, the prospects for manufacturing remain encouraging, as consumer confidence has risen, employment is up and purchasing power has increased.
In fact, according to a spokesman from Markit, April’s figures suggest that manufacturing is on track to reach the 1.3 per cent growth estimated for the first quarter.