UK manufacturing output - and inflation - are up

Although UK manufacturing output is at its strongest for almost three years manufacturing firms report highest factory gate price inflation for just over two years.

SME manufacturers had another strong quarter with business activity continuing to grow.

Manufacturers put up prices at the factory gate again and this time to the highest level for just over two years, according to the 'PKF SME Index', a survey of 800 SMEs operating in the manufacturing, construction and service sectors.

Output by manufacturing firms was the strongest for almost three years in Q1 2007 at 56.0 - in the previous quarter it was 55.4 (marks above 50 indicate expansion and below 50 indicate contraction).

New business / orders remained steady at 54.2 although growth has slowed since Q4 2006 when the figure recorded was 55.5.

Anecdotal evidence suggested that increased orders were the main reason for the growth although many respondents cited this as seasonal.

In line with increased output, employment growth continued at a steady rate in Q1 with manufacturers adding to their payrolls again and at a higher rate than the previous quarter - 52.8 and 52.4 respectively.

Output charges have been rising consistently in the manufacturing sector and this quarter the increase was the highest for just over two years at 57.9 - last quarter's figure was 55.4.

Panellists cited higher cost burdens at their units as the reason behind the trend.

PKF partner for growing business, Stuart Barnsdall, commenting on this quarter's survey results said: "SME manufacturers have maintained steady growth again this quarter, but it is interesting to see that new orders experienced a dip in the rate of growth.

This could be a trend to look out for as input inflation, although slowing, continues to drive up factory gate prices and another interest rate rise is expected.

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