British manufacturing sector activity hit a four-year high in November, as factory output expanded at a rate of about 2% despite downbeat consumers, purchasing managers' index data from IHS Markit/CIPS showed.
The seasonally adjusted IHS Markit/Chartered Institute of Procurement and Supply purchasing managers' index rose to 58.2 in November from the revised 56.6 in October. The latest reading, the 16th consecutive monthly expansion, was the highest since August 2013 and the 10th-best ever recorded. The improvement reflected four-year-high rates of increase in new orders and production on the back of solid domestic demand and steeper gains in new export business, propelling employment to the greatest extent since June 2014.
Backlogs of work increased for the first time in six months, purchasing costs rose at a pace close to October's seven-month high and average supplier delivery times also increased. Input cost pressures and rising demand resulted in output charges climbing at the fastest pace in seven months, IHS noted.
"On its current course, manufacturing production is rising at a quarterly rate approaching 2%," said Rob Dobson, director at IHS Markit, adding: "The coming months should provide greater evidence on any impact that the recent interest rate increase from the Bank of England will have on reining in cost pressures."
The Bank of England increased its key policy rate by 25 basis points to 0.5% in November — its first hike in a decade.
More than 50% of the surveyed manufacturers expected production to be higher in one year's time, and the optimism was linked to company growth plans, capital spending, improving market conditions and efforts to grow client bases, the survey reported noted.
"As the impact of the weak pound diminished, businesses were turning their attention to new opportunities, clients, and investment as business optimism flourished from October's four-month low," Duncan Brock, director of customer relationships at the CIPS, said.
The improved performance by factories came despite signs that U.K. consumers, squeezed by rising inflation, squeezed incomes and economic uncertainty amplified by Brexit negotiations, are getting gloomier. Consumer confidence slipped 2 points to negative 12 in November, matching the score seen in July 2016 after the U.K. voted to leave the EU, a monthly GfK survey showed Nov. 30.
