UK factory output and orders rise in July, PMI shows

(Sharecast News) - UK factory output and orders rose strongly in July and sentiment improved as Covid-19 lockdown restrictions were relaxed, a survey showed.
Output growth hit a 32-month high as new orders rose at the quickest pace since the end of 2018, the IHS Markit/CIPS purchasing managers' index showed. Business sentiment recovered to its highest level for 28 months.

The PMI rose to a 16-month high of 53.3 in July from 50.1 in June marking two months of improvement. The result for July was below the 53.6% score reported in a preliminary "flash" survey and expected by the market. A score of 50 marks the difference between improvement and deterioration.

Manufacturers said the sector expanded in response to the easing of coronavirus restrictions, allowing factories to restart or increase production as clients reopen for business. Job losses continued though at a slower pace than in the previous three months.

Growth was strong in consumer and intermediate goods and new orders were mainly from domestic buyers. New export business fell for the ninth month running though the decline was weaker than in recent months.

Rob Dobson, a director at IHS Markit, said: "The UK manufacturing sector started the third quarter on a much firmer footing ... Despite the solid start to the recovery, the road left to travel remains long and precarious. An extended period of growth is still needed to fully recoup the ground lost in recent months."

Dobson said there was a significant risk of further job losses as the government phases out its furlough support programme unless demand and confidence rebound strongly in the coming months.

Samuel Tombs, a UK specialist at Pantheon Macroeconomics, said the lower final result for July compared to the earlier reading suggested activity weakened towards the end of the month.

"We remain concerned that the current strength of output partly reflects the release of pent-up demand after the lockdown, which ultimately will fade away by the autumn," Tombs said.