Lift for UK economy as all sectors grow in February

14 March 2002
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14 March 2002 | Robin Parker

The biggest rise in the CIPS purchasing managers' index (PMI) in the past 12 months for manufacturing suggests an early turnaround in the UK economy.

The February PMI for manufacturing, carried out in conjunction with NTC Research, rose by 4.6 points to 50.1, marginally more than the 50 mark that indicates no change.

The figure is the highest recorded in 12 months, and has confounded analysts' predictions that the sector, a prime influence on the economy, would not grow until the second half of this year.

The construction index grew for the thirty-seventh month, while services reported a second month of growth.

Manufacturing output reached its highest level in nearly two years, boosted by strong demand in the consumer goods sector.

Nearly a quarter of purchasing managers reported a growth in demand for exports, including strong orders from the US.

However, purchasing volumes remained below the no change mark as firms continued to buy supplies "just-in-time" because of a weak global manufacturing economy.

Andrew Potter, an economist at NTC Research, said the cautious approach was reflected in reports that purchasing managers continue to destock.

"The impression is of more of an inventory correction among clients than greater purchasing activity.

"We're beginning to see a bottom to the ongoing downturn and purchasers will try to guard against getting caught out when the full upturn comes."

The Eurozone index rose for the fourth month to 48.6, but the influence of the euro continued to push up the input prices index, which rose by 5 points to 56.3 after similar growth in January.

The Confederation of British Industry is lobbying the government for a clearer manufacturing strategy in the run-up to the budget on 17 April.

It argues that without further capital investment and research, the UK's manufacturing base will shift overseas, as businesses continue to source from and relocate to low-cost countries.


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