Factory output continued to increase at a robust pace in May, despite the rate of growth softening slightly. More favourable demand conditions and greater client demand were widely cited as driving the expansion of production.
Reflective of stronger demand conditions, new orders increased sharply in May. Moreover, the rate of growth was the second-fastest since September 2014 (after April 2018). Alongside the acquisition of new clients, panellists also noted that customers were demonstrating a greater propensity to spend. In contrast, new export orders increased only marginally.
As the rate of new business growth continued to outstrip that of output, backlogs rose again in May, increasing at the fastest rate in over two-and-a-half years. As a result, firms added to their payrolls again, with the rate of job creation picking up slightly during the month though failing to match the highs seen earlier in the year.
Meanwhile, price pressures remained elevated. Although rates of both input cost and selling price inflation eased slightly, they were nonetheless the second-fastest since September and June 2011 respectively (both after April 2018). Panellists reported that higher input costs were often due to suppliers being able to hike prices in response to strong demand.
Increased pressure on supply chains led to the greatest deterioration in vendor performance in the series’ history. Consequently, stocks of purchases rose at the quickest pace for four months as firms increased their efforts to create safety stocks.
Finally, business confidence remained robust in May, climbing to the second-highest since February 2015.