Manufacturing ‘back on the road to recovery’

skills300UK manufacturing is being hailed as being “back on the road to recovery” following new data from the Markit/CIPS Purchasing Manager’s Index (PMI).

The latest data indicated that the sector maintained its robust start to the third quarter of 2013. After the solid increases in output and new orders registered in July, August saw the momentum continue to build, the index suggested, with growth rates for both variables at their highest since 1994.

However, cost inflationary pressures surged higher on the back of rising raw material prices. The Index hit a two-and-a-half year high of 57.2 in August, up from 54.8 in July and has now signalled expansion for five successive months. Manufacturing output increased at the fastest pace since July 1994, with marked expansions signalled across the consumer, intermediate and investment goods sectors.

New orders rose for the sixth month running and to the greatest degree since August 1994. The domestic market was the main source of new contracts, although there was also a solid increase in overseas demand from the USA, China, mainland Europe, India, Scandinavia, Brazil and Ireland.

The main negative finding from the latest survey was a marked upsurge in cost inflationary pressures at manufacturers. Average input prices rose at the fastest rate for two years and at an above survey average pace. The month-on-month upward movement in the Input Prices Index (10.4 points) was the second-steepest in the survey history. Companies reported higher prices paid for commodities, feedstock, oil, paper, polymers and timber. Average selling prices also increased, but to a much lesser degree than registered for costs.

Rob Dobson, Senior Economist at survey compilers Markit said manufacturing was making a strong positive contribution to the economy, providing welcome evidence that the long-awaited rebalancing of the economy towards manufacturing and exports was at last starting to take place now that export markets were recovering. but he added, “While the latest PMI suggests that the output side is increasingly positive, the news on the other fronts is much less so. Employee numbers crept up only slightly, as companies squeezed extra output from existing resources. At the same time, the rate of input cost inflation surged upwards on the back of rising oil and related prices.”

EEF chief economist Lee Hopley said the conditions were right for manufacturers to see continued expansion in the remainder of this year with growth accelerating in 2014.

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About Ken Hurst

Ken Hurst began his career as a journalist in London over 30 years ago, working on a range of publications before moving on to weekly newspaper production in the newly-independent Zambia of the 1970s. He returned to the UK where his work included spells on newspapers and magazines, before moving to head up Norwich Union’s corporate affairs division. In the 1990s he moved on to freelance, co-own and publish the B2B audio magazine Sound and front the BBC radio Yesterday’s Papers programme. There followed six years as Business Editor at Britain’s biggest selling regional daily newspaper, The Eastern Daily Press, where he led an award-winning team and for whom he still writes a weekly socio/political comment column. Subsequently, he was Group Editorial Director at CBM, responsible for its UK and US magazine output – including The Manufacturer magazine – research-driven industry reports and live events content. Currently he is Contributing Editor at Works Management magazine publisher Findlay Media and Chairman of the consumer publishing house TNT Multimedia Ltd. He is a Fellow of the Royal Society of Arts and of the British Association of Communicators in Business.
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