The sector recorded the highest ever month-on-month rise in August to sit at 53.3 in August, up from 48.3 in July, as measured by the Markit/CIPS manufacturing PMI.
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Manufacturers taking part in the survey reported the biggest rise in input costs in more than five years, as the weaker pound made it more expensive to import raw materials.
Consumer and business confidence has also shrugged off European Union referendum jitters to push ahead, with August’s GfK Consumer Confidence Index up five points to minus 7 as people settle into a “wait and see reality” following the Brexit vote.
The pound leapt by more than a cent against the dollar to $1.3241 immediately after the data were released and hit a four-week high of $1.3328 after weak USA manufacturing data put pressure on the greenback. However, Markit put part of the August PMI rise down to a rise in exports, which resulted directly from a post-Brexit weakening of the United Kingdom currency.
Rob Dobson, senior economist at Markit, said a sense of normalcy had returned to the sector after the immediate gloom prompted by the referendum outcome and that new business levels, domestic as well as foreign orders, and new contracts all showed marked improvements last month.
The drop in the pound, which lost some 12 percent against the dollar since the vote, boosted export orders in August by making them more price-competitive in the global market place.
New orders grew at the fastest pace since December 2014, underpinned by higher demand from both domestic and external markets.
“Employment rose for the first time in the year-to-date”, the report stated.
“While it is encouraging that manufacturing activity appears to be stabilizing, there is a risk that this is a “calm before the storm” moment for the sector”, said Danae Kyriakopoulou at Cebr. Rates of expansion slowed for production, new orders and new export business, resulting in weaker job creation.
Markit, which compiled the PMI said, companies had reported restarting work which they had put on hold in July, as their clients saw business starting to return to normal.
Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said the data showed manufacturers got “their mojo back in August”.
Regionally, there was expansion in all regions, which continues to suggest stabilisation in the oil sector, with Ontario again out-performing on the month.
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Analysts also pointed out that the boost to exports from the falling pound has a flipside in that it fuels inflation.
