British manufacturers’ order books expanded at the fastest rate in two decades in August on the back of robust domestic demand, according to the latest snapshot of the sector.
The Markit/PMI survey of new orders jumped to 61.8 last month, up from 58.6 in July. Any reading above 50 signals growth.
“The UK’s factories are booming again,” Rob Dobson of Markit said. “Manufacturing is clearly making a strong, positive contribution to the economy, providing welcome evidence that the long-awaited rebalancing of the economy towards manufacturing and exports is at last starting to take place.”
Markit reported that most of the new orders were domestic, although it noted there was also a “solid increase” in overseas demand.
The output index for manufacturing also hit its highest level since July 1994. However, the survey also pointed to a slowing of employment growth and said there were signs of increasing costs pressures as firms’ input pressures rose at their fastest rate in two years.
The headline Markit/PMI manufacturing index – which reflects total activity – came in at 57.2, up from 54.8 in July and the highest since February 2011. The headline index has been in positive territory now for five successive months. The latest strong survey helped to send sterling to its strongest level against the US dollar in two months yesterday. Ten-year government bond yields also rose as traders anticipated a stronger recovery.
Manufacturing accounts for about 10 per cent of the UK economy. The latest official figures for the second quarter of 2013 showed the sector grew by 0.7 per cent in the three months to June, although output remained 10 per cent below its 2008 peak.