In these uncertain times any good news is welcome, so the latest positive reports from the Markit/CPS UK Manufacturing PMI survey have been a much-needed boost for those worried about the UK industry. But amidst post-referendum disquiet, a falling pound, and rising inflation, is this good news all it seems?
A Strong Footing
While many economists had predicted a downturn in UK manufacturing brought on by the effects of the Brexit vote, according to the PMI report the industry is experiencing an unexpected upswing.
Not only has there been an increased demand in new export business from China, America, Europe, and Asia, there has also been a good increase in domestic demand – soothing fears of a downturn in domestic spending due to Brexit uncertainty. This will come as welcome news to those of you looking for driving and industrial jobs.
“The UK manufacturing sector starts 2017 on a strong footing.” said senior economist Rob Dobson. “[The PMI] hit a two-and-a-half year high in December, with rates of expansion in output and new orders among the fastest seen during the survey’s 25-year history.”
Inflation Bites
Of course, one of the main reasons international exports are doing so well is the pound’s depreciation. The weakness of our currency is making UK manufacturing much more attractive to a strengthening global market and, while this leads to a boost in exports, it also means that import costs will rise alongside inflation and factory costs.
The positive story being told by the Markit/CPS report has also not been reflected in the official figures, which actually show a fall in output for both manufacturing and the industrial sector as a whole.
It’s likely that the eventual outcome for 2017 will be somewhere in the middle. While inflation and higher costs are likely to take their toll, a weakening pound should help to mitigate this by encouraging international exports.
As with any Brexit-based news, there also remains a healthy dose of uncertainty as details of future trade deals remain obscure. However, with manufacturing making up 10% of the economy, this unexpected boost in performance is surely hopeful news for the rest of UK industry.
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