Higher levels of manufacturing production have now been recorded for the past two months, with the latest expansion the fastest since November 2015. Survey respondents commented on strong sales growth, the launch of new products and generally favourable domestic economic conditions. Some firms noted that weak demand from the energy sector and uncertainty related to the presidential election remained growth headwinds.
An acceleration of production growth was driven by a robust rise in new business volumes in July. The latest expansion was the fastest for nine months and close to its post-crisis average. Meanwhile, new export orders rose at a weaker pace than seen for overall new business, suggesting that domestic markets remained the main driver of growth in July. However, although only modest, the latest rise in new export orders still compared favourably with the stagnation seen on average over the past year-and-a-half.
Improved demand conditions and greater production volumes encouraged further job creation across the manufacturing sector in July. The latest survey highlighted a solid upturn in employment numbers, with the pace of expansion the fastest for exactly one year.
Manufacturers also boosted their input buying in response to greater workloads. Higher levels of purchasing activity have now been recorded for three months running, but the latest survey indicated that input stocks were depleted again. Finished goods inventories also decreased in July, which firms linked to deliberate stock reduction policies and associated efforts to boost efficiency.
Meanwhile, the latest survey signalled a solid pace of input cost inflation across the manufacturing sector. Increased input prices have now been recorded for four months in a row and the rate of inflation picked up to its strongest since November 2014.
Anecdotal evidence suggested that higher steel prices and rising staff salaries had contributed to upward pressure on average cost burdens. Despite a faster rise in input costs, July data signalled that output charge inflation remained marginal and eased since the previous month.