By Daniel Hunter

The UK manufacturing sector continued to expand at a marked pace during September, to round off its strongest quarterly performance since the opening quarter of 2011. The labour market also showed further signs of improvement, as the rate of job creation climbed to a 28-month peak.

At 56.7 in September, the seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) remained in expansion territory for the sixth successive month and was little-changed from August’s two-and-a-half year peak of 57.1 (previously reported as 57.2).

Manufacturing production expanded for the sixth consecutive month in September, with the rate of increase staying close to August’s 19-year high.

The growth rate in incoming new orders also lost only minor impetus from a similar peak reached in the prior survey month. The domestic market remained the prime source of new contact wins.

September data indicated that the growth in output and new order volumes was felt across the manufacturing industry, with all of the sub-sectors covered by the survey reporting increases in both.

The level of new export business also rose in September, but only moderately and to the weakest extent since May. Companies reported higher demand from the US, Europe, Asia, Middle-East, Scandinavia, Latin America, Russia and Australia.

September saw manufacturing staffing levels rise at the fastest pace since May 2011. Increased employment supported efforts to raise production and clear backlogs of work. Subsequently, the level of work-in-hand fell at a slightly faster pace than during the previous month.

Prices continued to rise in September, with both input costs and output charges higher than one month ago. Although the rate of purchase price inflation eased from August’s two-year peak, it remained above its average for the year-to-date.

Manufacturers reported higher prices paid for commodities, dairy products, energy, feedstock, oil, paper and plastic. A key bellwether of future input price increases — average supplier lead times — also pointed to raw material cost pressures building.

Factory gate prices, meanwhile, increased for the third month running and to the greatest extent since September 2011. The main factor driving up output charges remained higher input costs. However, there were also reports of selling prices being raised to protect, or even improve, operating margins.

“The manufacturing sector maintained its stellar performance this month, building on last month’s 2- and-a-half-year high to round off the best quarter of growth since Q1 2011. Employment levels soared in September, rising at the sharpest pace since May 2011 completing a positive outlook for the rest of the year," David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply.

“The domestic market remains the engine for growth across all three sub sectors, boosting new business in the UK and giving manufacturers added confidence. Businesses will be hoping overseas demand, which rose moderately this month, can match that at home. This will be the key to unlocking continued growth.

“On the flipside however, increased demand has seen suppliers come under greater pressure and lengthening lead times. This has in part been caused by long shipping delays, particularly in raw materials, signalling the sector could be hit with further input price rises. For the time being however, firms on the most part have been able to pass these costs on and protect their margins.”

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