Manufacturing activity stays near record high as UK eyes continuous recovery

Written by Kunal Sawhney, CEO, Kalkine Group 

Manufacturing production has invariably corroborated the economic recovery in the United Kingdom, with June’s final reading staying near a record high. The economic growth has been apparently keeping up the pace and will likely continue the momentum unless there is an exceptional breakdown due to the recent surge in the cases linked to the Delta variant of the Covid-19 (SAR-CoV-2) virus.

The macroeconomic indicators have adequately supported the gross domestic product (GDP) of the nation, following the hopes of a sooner-than-expected bounce back in the overall business sentiments.

The output of the manufacturing sector remained robust in June 2021, with the rate of expansion in new orders, final output and number of new employment opportunities supported by the industry hitting a 30-year high. However, the final reading of the PMI has been revised marginally from the previous estimates.

According to the data compiled by the IHS Markit/CIPS, the manufacturing PMI in the UK stood at 63.9 in June as compared to the preliminary estimate of 64.2. Even with a moderate correction, the final PMI reading stays near the record high of 65.6 registered in May 2021.

There have been several supply-chain and distribution hurdles faced by the industry, thereby leading to disoriented production schedules and longer turnaround times. The dynamic upswing in the global market conditions because of the renewed Covid activity alongside the extant restrictions in place to combat the Covid-19 pandemic resulted in supply-chain troubles, fuelling the inflationary pressure.

The planned easements announced in May have substantially helped the factory activity to maintain the pace as the quantum of output, as well as the new orders, have risen invariably.

Notably, the potential delay in the scheduled easements for June might have a slight impact on the ongoing scale of commercial operations.

But the healthcare administration remains on target to inoculate all the possible adults before proceeding with step 4 under which all the Covid restrictions will be eased. The Department of Health and Social Care has already expedited the frequency of the vaccine programme, effectively making sure to cover an enlarged population with the two-dose regimen before announcing further relaxations in the UK.

Nevertheless, there could be a marginal setback due to a sudden spike in inflation, exceeding the Bank of England’s target. But momentary out-turn won’t impact the growth story in a longer stretch.

Following the meaningful growth in the reporting month, the PMI has signalled an improvement for 13 successive months from June 2020 onwards. The April-May period of the previous year was the worst 60-day period for the national economy, as the country went into its first country-wide lockdown. Also, the healthcare settings were quite unsure of the nature of response they needed to prepare in order to safeguard the victims of Covid-19.

As far as the business confidence is concerned, it remained solid in June, while the average input costs and final selling prices jumped to the highest peaks. Following the restated inflow of work from the United States, Europe and Asia, the volume of new export orders swelled again.

More than 775 of the manufacturers have reported an increase in the average input costs as the price of several raw materials, including chemicals, energy, food products, plastics and timber, electronics, ticked up in June.

The fresh employment opportunities have certainly risen in the corresponding period following the escalated demand and rapidly increasing exports. The rate of expansion in employment was close to May’s record high. With nearly 63% of the corporations expected to ramp up the production in the upcoming months, there will be a continuous demand for skilled as well as non-skilled workers across the nation that can help in building better, overcoming the uncertainty over Brexit and Covid-19.

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