UK factory output made tentative gains in June after a slump in the spring, but firms still shed jobs amid fears over the referendum vote last week.
The survey of manufacturers, which was mostly conducted ahead of the decision to quit the EU, found that most of the gains came from solid growth in new orders, which rose at the fastest pace since last October.
The Markit/CIPS purchasing managers’ index (PMI) increased to 52.1, from a revised reading of 50.4 in May, its highest level since January.
Rob Dobson, senior economist at survey compilers Markit, said the rise in new orders reflected the continuing strength of domestic business with a little support from the export sector, which remained tough.
He said: “With 99% of survey responses received before the end of 23 June, the latest PMI signalled that the manufacturing sector has started to move out of its early year sluggishness in the lead-up to the UK’s EU referendum.”
The PMI also rose to a five-month high on the back of improved rates of expansion in production and a demand for capital goods, which Dobson said was a key bellwether of broader investment spending.
However, he warned that manufacturers, who have yet to regain the level of output before the 2008 crash, remained wary of economic and political developments.
“Whether this growth recovery can be sustained will depend heavily on whether the current financial and political volatility spills over to the real economy.
“While the Bank of England remains poised to act if needed and the UK’s trading relationships are unchanged during the two-year negotiation period, there’s a clear risk that ongoing uncertainty will have at least some short-term impact on manufacturing during the coming quarters,” he said.
“The big question is whether any negative impact from uncertainty can be partly offset by a boost to exports resulting from the fall in the pound.”
Surveys of eurozone manufacturers by Markit found that only France continued to struggle as the other 18 members of the currency bloc moved ahead, including Greece.
Markit said: “The recovery in the eurozone manufacturing sector gathered momentum in June. Growth of both production and new orders accelerated to the fastest in the year so far, taking the respective rates of expansion during the second quarter as a whole a tick above those achieved in quarter one.”
The eurozone PMI posted a six-month high of 52.8 in June, up from 51.5 in May and above the earlier flash estimate of 52.6.
“Growth was led by a resurgent Germany and Austria, where the rates of expansion accelerated to the fastest since February 2014 and May 2011 respectively,” Markit said.
“Upturns in Italy, Spain and Ireland also gathered pace, but slowed in the Netherlands. The Greek PMI moved back into expansion territory for the first time in six months, posting a 25-month peak of 50.4. The only nation to signal contraction was France.”
