Press release

4 May 2021 London, GB

Purchasing managers report UK manufacturing activity at 321-month high in April – EY ITEM Club comments

Purchasing managers report UK manufacturing activity at 321-month high in April – EY ITEM Club comments

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Related topics Growth COVID-19
  • The manufacturing sector grew faster in April as the economy had a helping hand from restrictions easing on 12 April. The manufacturing PMI rose to a 321-month high of 60.9. This was up from 58.9 in March and marked a third successive month of improvement from January when the economy was in lockdown
  • All manufacturing sectors saw robust growth in April – with many at long-term highs. Activity was led by the consumer goods sector which particularly benefitted from the easing of restrictions. The improvement also adds to belief that consumers are well-placed to play a leading role in the UK’s recovery
  • Output growth picked up to an eight-month high. Boding well for future output, new orders were at the highest level since November 2013. This was primarily due to improved domestic demand but foreign orders also picked up
  • Jobs growth was the second highest for seven years, confidence in future output was at a seven-year high and backlogs of work were at an 11-year high
  • However, Markit reported that there were some severe supply chain and logistics issues. These led to delivery delays from suppliers and disruption to production and distribution schedules. This was reflected in input prices rising at a record increase in prices charged
  • While the PMI can overstate developments in the economy at times of change, the strength of the manufacturing survey fuels belief that the economy has made a robust start to Q2 2021
  • With Q1 likely having seen a slower contraction than had originally been anticipated, and with the economy looking to be on the front foot at the start of Q2, the EY ITEM Club has substantially raised its 2021 GDP growth forecast to 6.8%
  • Consumers look well-placed to play a leading role in the UK recovery given the recent high savings ratios, especially as it now looks likely that unemployment will rise much less than had been expected. After an extended period of weakness, business investment is expected to gain momentum over the course of the year as companies grow more confident in the economy and their own prospects; this should be supported by the tax incentive to invest in the Budget. 

Howard Archer, chief economic advisor to the EY ITEM Club, says: 

“The purchasing managers survey pointed to the manufacturing sector expanding at the fastest rate for 321 months in April. The PMI rose to 60.9 in April – revised up from the ‘flash’ reading of 60.7 – from 58.9 in March, 55.1 in February from a three-month low of 54.1 in January.

“While Markit noted the manufacturing PMI saw elevated output, new orders and employment indices, it was also reported that the exceptionally high PMI reading also reflected another rapid lengthening of suppliers’ delivery times during April.

“Output growth improved markedly to an eight-month high in April with the index rising to 59.2 from 56.6 in March and a nine-month low of 50.5 in February. Markit reported that output growth was attributed to a ‘loosening of lockdown restrictions, improved demand and rising backlogs of work.’ Solid and accelerated expansions of output were seen across the consumer, intermediate and investment goods industries, with the consumer goods category the strongest performer overall. 

“While all manufacturing sectors saw robust growth in April, it is notable that activity was led by the consumer goods sector. The consumer sector would have particularly benefitted from the easing of restrictions in April, and the improvement also ties in with belief that the consumer is largely well placed to play a leading role in the UK’s recovery.

“The fact that the manufacturing sector had earlier seen healthy expansion in March, despite ongoing lockdown measures, reflects the fact that lessons have been learned in keeping activity going from the initial lockdown introduced last March. Many factories have been adjusted to meet the social distancing so employees can still work on site.

“New orders rose for a third month running in April and at the fastest rate since November 2013. The pick-up in orders was primarily due to stronger domestic demand. but it was also notable that export demand rose at the fastest rate so far in 2021.  

“Backlogs of work increased at the fastest rate for 11 years, which is supportive to future output. Jobs rose at the second fastest rate after March for seven years. Additionally, confidence in prospects for the next 12 months was at a seven-year high.

“However, there were still some concerns for the manufacturing sector as Markit reported that there were supply chain and logistics issues, which led to delivery delays from suppliers and disruption to production and distribution schedules.

“Manufacturing input prices rose at the second fastest rate since January 2017, reflecting supply chain disruptions affecting raw material supplies. Increased costs were passed on to clients, with manufacturing output prices also rising at a record rate.”