June’s UK CIPS report on manufacturing suggests that the industrial sector is in fine fettle. The PMI rose from 57.0 in May to 57.5, just shy of November’s 34-month high of 57.8. And while the output balance fell from 61.0 to 59.4, its average level in Q2 is consistent on the basis of past form with quarterly growth in the official measure of manufacturing output of about 2%, stronger than the 1.5% growth seen in Q1. What’s more, the rise in the new export orders balance to its highest level since January provides some reassurance that the stronger pound is not having too great an impact on demand for UK goods.
Meanwhile, there is still little sign that price pressures are building in the manufacturing sector. Admittedly, the input prices index rose from 48.6 to 50.6, the first reading above 50 since January. But it is still well below its average of 53 in 2013. And although the output balance rose from 52.7 to 53.2, the balance remained below its average level seen over the last year.