UK manufacturers are still optimistic about the future

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First blog of 2018, so… happy new year!

2018 is starting with a positive note thanks to the good manufacturing PMI result. The IHS/Markit index registered a solid 56.3 after an outstanding 58.2 in November.

Cooling down but not over yet

November’s manufacturing PMI peaked at 58.2 which was the best performance in over four years; December’s result is 1.9 points lower and even though forecasters were predicting a PMI result equal to 58.0, it’s not to be considered a bad result.

56.3 is still much higher than the 50 threshold and indicates that manufacturers are looking at 2018 positively. The result for the final quarter of 2017 averaged at 57.0 which was the best results since the second quarter of 2014. This was in line with what we reported at the beginning of December with our Manufacturing Outlook.

Inflation easing but still exerting some pressure

Input costs were at a four month low in December. However, companies are still feeling the pressure coming from costs related to a weak exchange rate (i.e. raw materials, overseas suppliers), input shortages, and price adjustments made by suppliers after months of cost pressures. Some of these costs were passed to consumers and selling prices have been raised for the twentieth month in a row.

A story of investment goods and world demand

In line with what we reported in our Manufacturing Outlook, output, new orders, and employment indicators were all up. This growth appears to be linked to a revival in investment goods and intermediate consumption. The PMI results also underline how this growth is not shared by consumer producers which are still suffering the consequences of real wages contraction and an overall slow economy.

The “mantra” of growth driven by a buoyant global demand continues to be repeated this month. Indeed demand improved in all the major UK markets (Europe, US, China, and Middle East).

Our partners are flying really high

If UK manufacturers are doing good, then our European partners are doing great.

The final Eurozone manufacturing PMI of 2017 is at 60.6, up from 60.1 in November. PMI is at record levels in several European countries and overall business optimism is at record high. This optimism is spread not only to solid countries such as Germany (which is registering its historic high) but also weaker southern countries such as Italy, Spain, and Greece (best performance of the last 114 months). Hopefully this optimism will translate in a great 2018 for manufacturers in Europe.



Stay tuned for more news about the UK economy and the manufacturing sector from us this year, and find out on Monday 8th January if this buoyancy translates into manufacturers’ expectations for 2018 when we publish out annual Executive Survey

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