Manufacturers indicated a further solid increase in production volumes during the latest survey period, with the pace of expansion the joint-fastest since November 2015. Anecdotal evidence suggested that improving economic conditions and sustained new business growth had led to increased production schedules. The latest upturn in new orders was slower than the nine-month peak seen in July, despite new export sales rising at the steepest pace since September 2014.
Relatively subdued new order growth led to a weaker pace of staff hiring across the manufacturing sector in August. The latest increase in payroll numbers was only marginal and the least marked since April. Some firms also cited efforts to improve efficiency in response to pressure on margins. That said, backlogs of work continued to rise in August, which some manufacturers linked to short-term pressures on operating capacity.
The latest survey indicated a reduction in stocks of finished goods for the third month running. A number of firms noted that post-production inventories were depleted in response to softer new business growth and caution regarding the demand outlook. Stocks of inputs were also reduced in August, although at the slowest rate since February. While some manufacturers commented on the need to boost cash flow, there were also reports citing looser inventory policies in response to lengthening delivery times from suppliers.
Meanwhile, average cost burdens increased at only a marginal pace in August. The rate of input price inflation was the weakest since March, despite reports of rising raw material costs (especially steel). Factory gate charges were broadly unchanged in August, which contrasted with rising output prices during the three months to July.