Weighing on the headline index was a softer rise in manufacturing production. Output at manufacturing firms increased at the weakest pace since June 2016 in August. Some panellists noted that relatively subdued foreign client demand had limited growth in production.
Meanwhile, new orders rose at a pace only slightly weaker than July. Anecdotal evidence linked the rise in new business to improving domestic economic conditions and an associated rise in customer demand. In contrast, new export sales were broadly unchanged in August, following a fractional contraction in July.
For the first time since April, the level of outstanding business at manufacturing firms increased. Backlogs rose at a modest rate and panellists generally linked growth to greater volumes of new orders. Subsequently, firms continued to hire additional staff. Workforce numbers expanded at the strongest pace in six months.
On the price front, cost burdens increased at the fastest rate since April and output price inflation was the strongest in three months. Panellists noted that input cost inflation was driven by higher raw material prices, especially steel and electrical components. Firms generally passed these rises on to clients through increased factory gate charges.
In line with slower output growth, buying activity and inventories expanded at weaker rates. Nonetheless, a sustained increase in purchasing activity amid reports of stock shortages at vendors contributed to the greatest deterioration in vendor performance since March.
Positive sentiment remained robust in August, despite slipping slightly since July. Anecdotal evidence stated that optimism was influenced by improving market conditions and stronger client demand.