Factories enjoyed their strongest production pick-up for six years in August as reopening firms ramped up output and exports returned to growth.
The sector expanded for a third straight month in the purchasing managers’ index (PMI) but the acceleration could not stop job losses mounting as manufacturers urged caution on the recovery. The PMI climbed from a score of 53.3 to 55.2 last month, the highest level since 2018 and slightly below the flash estimate. Any score above 50 signals growth.
Exports rose for the first time in 10 months as the recovery continued to gather pace in China and the eurozone enjoyed a second straight month of growth, the PMI surveys revealed.
However, British manufacturers warned the rebound was largely driven by firms restarting operations after shutting down during lockdown. Despite the strongest production growth since 2014, firms laid off workers for a seventh straight month with employment declining at one of the steepest rates in the last decade.
The industry warned redundancies will pile higher in the coming months as the furlough scheme is wound down.
Fhaheen Khan, economist at Make UK, said the “honeymoon period for above average growth may be short-lived”.
He warned that the industry body’s data suggests job losses are accelerating as firms attempt to cut costs ahead of the furlough scheme’s end in October. Mr Khan urged the Government to extend the scheme for the most vulnerable sectors.
“It will take a lot more growth like this to make up for the ground lost since the pandemic struck,” warned Lee Collinson, head of manufacturing at Barclays.
“Manufacturing is already cutting jobs and with the end of government support schemes in sight, cost challenges will continue to pre-occupy and challenge the sector.”
In China, Caixin’s Chinese manufacturing PMI jumped to a nine-year high, unexpectedly rising from 52.8 to 53.1 as global demand rebounds.
Italy and Germany led the recovery in the eurozone despite the recent pick-up in Covid-19 cases. The eurozone PMI slipped marginally to 51.7 but the sector recorded a second straight month of growth.