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Published: Thu, November 02, 2017
Economy | By Melissa Porter

United Kingdom factories expect another year of growth as acceleration takes hold

United Kingdom factories expect another year of growth as acceleration takes hold

After having risen at the fastest pace in over six years in the previous month, input costs increased sharply again in October and at a rate that was little-changed from September.

The headline Nikkei Malaysia Manufacturing Purchasing Managers' Index (PMI) saw the sharpest drop in three months to 48.6 in October from 49.9 in September, due to lower new business volume.

"The strong performance of manufacturing businesses at the start of the final quarter of the year, measured alongside rising inflation in the sector, could add more impetus to the Bank of England' decision tomorrow and may tip the balance towards raising interest rates".

Activity in Britain's manufacturing industry rose in October, as domestic demand drove a raft of new contracts and the weak pound help deliver further growth in export orders. Any reading above 50 indicates growth in the sector, while anything below represents contraction. Meanwhile, the level of business confidence eased to the weakest since February.

Official figures earlier this month indicated the United Kingdom industrial output expanded 0.8% with manufacturing output growth of around 1% for the third quarter, more than reversing the second quarter's contraction.

Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply (CIPS) said: "While trade from export markets slowed slightly, orders from overseas continued to rise for the 18th month supported by a robust global economy".

Britain's factories enjoyed better-than-expected growth last month, cementing expectations that the Bank of England will deliver the first interest rate hike in a decade.

On the price front, input price inflation accelerated to a 5-month high in October. Subsequently, companies reportedly raised their output prices to pass on a greater cost burden to clients and protect their profit margins.

Manufacturing production rose for the 14 month running in September. Inflows of new orders stagnated as the negative effects arising from the implementation of GST continued to dampen demand levels.

For his part, IHS Markit's chief business economist, Chris Williamson, emphasised the broadening out of the expansion to smaller firms. Foreign demand contracted at the fastest pace since September 2013.

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