Surprise growth in US new orders gives hope to the UK

17 January 2002
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17 January 2002 | Robin Parker

Figures from the US showing unexpected growth in new orders have brought hope to manufacturers in the UK.

The manufacturing report on business from the Institute for Supply Management (ISM) for December showed the sector is set to recover.

New orders grew for the first time since the terrorist attacks of 11 September. The index stood at 54.9, up from 48.8 in November and above the 50 mark that indicates no change. It was the sharpest growth in order books since April 2000.

The overall manufacturing index grew 3.7 points to 48.2, exceeding analysts' predictions.

In the ISM's biannual economic forecast last month, manufacturing purchasing managers predicted activity would grow by 3.2 points this year, compared with a 1.6 point drop in 2001.

Norbert Ore, chairman of the ISM manufacturing business survey, was encouraged by the signs, but remained cautious.

"I didn't expect new orders to move out of contraction," he said. "It is the first signs of life from the technological parts sector. I'm not sure that it can repeat itself in January."

The UK December purchasing managers' index (PMI), produced by NTC Research for CIPS, fell for the tenth consecutive month, to 45.2, its lowest level since January 1999.

Deliberate stock reduction led to the sharpest fall in stocks of finished goods in the survey's history. Manufacturing employment also fell to a record low as more than a quarter of firms reported laying off staff.

Luke Thompson, senior economist at NTC Research, said the US upturn was encouraging, though UK prospects were poor. "There are too many variables," he said. "The situation is complicated now the pound and euro exchange rates are fluctuating."

Cambridge Econometrics' twice-yearly study, Industry and the British Economy, meanwhile forecasts 1.5 per cent growth in UK gross domestic product this year, with a 0.5 per cent fall in UK exports.

SMjan2002

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