Growth spurt for UK factories will be short-lived, PMI shows

[LONDON] UK factories grew at the fastest pace in four years as the industry sought to get ahead of price increases and supply strains triggered by the Middle East conflict, a key survey found. 

S&P Global said its manufacturing purchasing managers’ index (PMI) rose to 53.9 in May, up slightly from 53.7 the previous month. Any reading above 50 signals growth in the sector.

The pickup is nonetheless likely to be short-lived given it was largely driven by businesses bringing forward purchases, S&P said. Businesses are ordering what they need now to beat expected future price increases and delivery delays.

Still, it means the sector has diverged sharply from the rest of the economy since the war in Iran darkened the outlook. Domestic uncertainty may also begin to feed into consumer and business spending decisions with Prime Minister Keir Starmer facing the ongoing threat of a leadership challenge.

The growth spurt in factories could help cushion an expected slowdown in the UK economy after a healthy first quarter saw growth pickup to 0.6 per cent.

Economists expect quarterly growth to ease to the more pedestrian levels that have dogged Britain in recent years, as households grapple with another spike in living costs caused by the war.

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There were also signs that inflationary pressures are continuing to build in the pipeline. Average selling prices rose at the fastest pace since July 2022, with the pickup from April the second-largest on record.

The survey found that costs are rising for a range of products including raw materials, energy and electronics.

S&P said supply chains “remained under significant duress” with delivery times lengthening as the Middle Eastern conflict delays shipping in the region. BLOOMBERG