Contributing to the upward movement in the headline figure was a return to output growth in September. Production increased at a marginal pace that was nonetheless the fastest since May. Firms often attributed the upturn to greater workforce numbers as companies sought to broaden capacity. Some manufacturers, however, noted that less downbeat demand conditions had helped to support the expansion in output.
New orders fell for the fifth month running in September, albeit at the slowest pace in this period. Firms continued to highlight strain on customer spending due to high interest rates and inflation. That said, some suggested that there were signs of a pickup in customer interest, as per S&P Global.
At the same time, new export orders continued to decrease as challenging economic conditions in key export markets dampened demand. The rate of decline was, however, the slowest in the current 16-month sequence of contraction.
The rate of cost inflation quickened again to the sharpest since April. In turn, firms sought to pass through greater operating expenses to customers through the fastest rise in selling prices in five months. Nevertheless, rates of inflation were well below their respective series averages and much softer than those seen over the last three years.
Greater hopes of a return to growth of new orders and further increases in output spurred firms into another round of hiring in September. The rate of job creation was modest and broadly in line with the long-run series average. Greater employment allowed firms to clear backlogs, as work in hand fell solidly. The pace of decline was the slowest since April, however.
Firms also pinned confidence on investment in marketing and outreach to new customers. The degree of optimism regarding the 12-month outlook for output was notably the highest since April 2022.
Finally, a further decrease in new orders led firms to cut their purchasing activity again despite an improvement in input delivery times. The fall in input buying led to a subsequent drop in pre-production inventories. Efforts to reduce safety stocks and ease cashflow also resulted in a strong contraction in stocks of finished goods.
ALCHEMPro News Desk (DP)
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