Strong start to 2017 for manufacturing, but steep rise in import costs a concern

The manufacturing sector has recorded a strong start to 2017 with output rising at the fastest rate since May 2014 as new orders increased at pace, despite a record increase in import costs.

The seasonally adjusted Markit/CIPS Purchasing Managers’ Index (PMI)* was at 55.9 in January, only just below December’s two and a half year high of 56.1.

The slump in the pound and the higher cost for commodities such as oil, plastics and steel has however forced manufacturers to push up the cost of their goods at the steepest rate ever recorded by Markit/CIPS PMI survey throughout its 25 year history.

51 per cent of respondents expect output to rise over the next 12 months, reflecting new market opportunities and planned product launches.

Commenting on the report, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, comments:

“The sector was awash with optimism … But there were pressures on the price front as input costs rose at their fastest rate in 25 years and higher commodity prices made an impact on margins along with the weaker pound. With these on-going cost burdens, manufacturers were no longer able to absorb these costs themselves as output prices grew at one of the fastest rates since records began. Consumers must soon be wondering whether these rising costs will impact on their daily life.”

A separate Citi/YouGov survey of 2,023 members of the British public shows that inflation expectations rose to its highest level in January, the strongest in three years. The Bank of England and is due to publish updated inflation forecasts tomorrow.

At Beavis Morgan, our specialist advisers to SME businesses across a broad range of sectors, including the manufacturing sector, are able to assist with all aspects of business performance including ensuring that adequate measures are put in place to protect the health of your business, both now and for the future.

Our Research & Development (R&D) tax credits team has also made a significant number of successful claims on behalf of clients who have invested in innovation.

Contact Steve Govey or your usual Beavis Morgan Partner for further information about how we can assist.

*Source: Markit/CIPS UK Manufacturing PMI®