02 May 2006 | Anusha Bradley
Manufacturing is on the mend in the UK with an increase in new business and a rise in employment, according to the April CIPS/RBS Purchasing Managers' Index (PMI).
The seasonally adjusted PMI - a composite indicator of sector conditions in which an index above 50 means growth - rose to a 17-month high of 54.1, up from March's reading of 50.8, as growth in manufacturing output and new orders reached their highest levels since November 2004 and July 2004 respectively.
This latest expansion in new business was mainly caused by increased domestic demand. New export orders were higher than in March, but growth was restricted by the strength of the British pound compared to the Euro and US dollar.
Growth in business encouraged manufacturers to raise employment for the first time in over a year. The employment index posted a reading of 50.7. However, the rate of increase was only slight as firms stuck to ongoing restructuring and cost-control initiatives.
The input prices index posted a reading of 63.7, indicating that manufacturers continued to operate in a high-cost environment. The rising price of oil, energy, plastics, metals and packaging components were the main factors driving up costs.
Average delivery times deteriorated for the 11th successive month, indicating a build up of supply-side pressure during April. The suppliers' delivery times index posted a reading of 44.9. Longer lead times lead to the short supply of a number of metals, particularly steel.
Roy Ayliffe, director of professional practice at CIPS, said April's PMI results signalled a "long-awaited recovery" in the UK manufacturing sector.
The RBS/NTC Eurozone manufacturing PMI rose to 56.7 in April, up from 56.1 in March. There was a steep improvement in business conditions and the rate of growth in output, new orders, employment, exports and purchasing rose at the sharpest rate since September 2000.
Manufacturing activity in the US grew for the 35th consecutive month. The Institute of Supply Management's PMI for April was posted at 57.3, compared with 55.2 in March.