UK manufacturing sector remains subdued

2 February 2006
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02 February 2006 | Rebecca Ellinor

Strong competition from cheaper foreign producers led to a decrease in exports for the UK manufacturing sector in January but domestic orders remained solid.

The latest CIPS/RBS purchasing managers' index (PMI) - a composite indicator of sector conditions in which an index above 50 means growth - recorded a reading of 51.7, a slight increase on December's revised figure of 51.3.

The report says while it is the sixth successive month in which growth has been recorded, the rate of expansion was moderate.

Roy Ayliffe, director of professional practice at CIPS, said purchasing managers in the sector continue to face "significant challenges" with 2006 opening with downcast conditions.

"Factory output remained solid and new orders rose in response to successful marketing initiatives. However, the New Year saw the export market enter into decline in the face of strong competition from cheaper overseas producers," he said.

"In response to difficult operating conditions, manufacturers continued to cut jobs and attempted to pass on costs to customers - a strategy which was only partly successful."

The new orders index was unchanged from December, posting a reading of 53.1. The employment index came in at 46.5, a slight downturn on December's reading of 46.8, as job losses were recorded for the 10th month in a row. The backlogs of work index posted at 46.1 compared with December's reading of 45.9.

Meanwhile, the RBS/NTC eurozone manufacturing PMI recorded 53.5 in January, down from December's 16-month high of 53.6.

In the US, the Institute of Supply Management recorded a manufacturing PMI of 54.8 for January. That was an increase on December's score of 54.2 and meant activity in the sector grew for the 32nd consecutive month.

* Coverage of previous months' PMI reports is available at www.supplymanagement.com/pmi

* More information on the UK and euro-zone PMIs is available at www.ntc-research.com

* The full text of the ISM reports on the US manufacturing economy is available at www.ism.ws/ISMReport

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