PMI shows swift growth continues for UK manufacturers

1 June 2010

1 June 2010 | Nick Martindale

The UK manufacturing sector continued the same rapid pace of expansion it set in April during May and is now growing faster than at any time since 1994.

The Markit/CIPS Purchasing Managers’ Index (PMI) figures released this morning revealed a repeat of April’s figure of 58, where a score of 50 represents no change.

Rob Dobson, senior economist at Markit and author of the UK Manufacturing PMI, said: “Although production remains well below pre-recession levels, the sector is now recovering its losses at a surprisingly rapid pace. The PMI suggests that output growth this quarter should at least match the first-quarter gain of 1.2 per cent reported by the official figures.

“However, although growth was driven by a combination of robust demand from domestic customers and a strong export performance, both of these sources of new orders may disappoint as we move into the summer.

“Austerity measures announced in the UK may cool home demand, while export sales may be hit by the sovereign debt crisis in our largest trading partner, the euro-zone.”

The sector was boosted by growth in new orders, including products for export. But the fast pace of expansion caused supplier lead times to lengthen and cost inflation to hit a 21-month high.

David Noble, chief executive of CIPS, said: “The strength of recovery of the UK manufacturing sector has taken everyone by surprise. This time last year the industry was on its knees. While the turnaround so far this year is obviously good news, we can’t forget this has been driven in large part by the weak sterling exchange rate bolstering export demand.

“There are also additional troubles looming on the horizon which could constrain the pace of recovery. The boost from the inventory cycle will eventually wane as firms stop balancing their stock, while the new government’s austerity measures will undoubtedly dampen the domestic market.

“Despite all this, the increase in manufacturing jobs is very good news, not just for the health of the sector but for the UK economy as a whole. Higher employment means more money in the pockets of consumers, which will have a positive knock-on effect on other parts of the economy.”

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