Manufacturers face tough year despite rise in orders

11 December 2003
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11 December 2003 | David Arminas

The growth rate of Britain's manufacturing sector increased in November, the fifth successive monthly rise, signalling a strong beginning to the new year.

But despite the optimistic outlook, purchasers face a year of uncertainty in 2004.

The purchasing managers' index (PMI), published by CIPS and Reuters, rose to 54.5, up from a revised 54.3 in October. A figure above 50 indicates growth on the previous month.

The order intake for November was the strongest since December 1999.

Export orders showed their strongest rise in the PMI's eight-year history, with more orders from France and Germany in particular.

But data from National Statistics showed investment in the manufacturing sector fell by 5.8 per cent to its lowest level since 1983. And figures from the Engineering Employers' Federation (EEF) showed that, despite the best growth in engineering output for four years, the UK could lose 50,000 engineering jobs next year on top of the 70,000 the sector is on target to lose this year.

Roy Ayliffe, director of professional practice at CIPS, cautioned that the upswing noted by the PMI still leaves purchasers with an uncertain year ahead.

"The economic environment is still on a knife-edge," he said. "Next year could bring a protracted trade war between the US and Europe, as evidenced by recent tensions over American intentions to hike steel tariffs to protect its market."

Ayliffe noted that other issues, such as international security, make these "very uncertain times for purchasers".

November's PMI for construction showed the strongest expansion of activity since June 2001. It rose to 60.5 from 58.9, with housing again showing the most robust growth. Commercial construction rose sharply and civil engineering's rate of growth was the strongest for a year.

Expansion in services surged to its fastest rate since June 1997.

Although retailers report slow Christmas sales, they are confident of a strong December, according to the CBI's latest distributive trade survey.

Related article links: News focus; Insight commodity list

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