UK manufacturing edges closer to stabilisation

3 December 2012

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3 December 2012 | Anna Reynolds

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) reported a figure of 49.1 in November, stronger than October’s 47.3 index, but remaining below the no-change mark of 50.

While overall production rose for the first time in five months, this was largely due to a reduction in backlogs of work, with outstanding business falling at one of the fastest rates since 2011.

Output trends were uneven across the sector, with contractions in capital and intermediate goods offsetting strong growth in the consumer goods sector.

Companies experienced a decline in new business from Europe and the US, with one in five manufacturers reporting a decrease in new orders from overseas. Firms are maintaining a cost-cautious approach to hiring, purchasing and stock holding, with job losses accelerating since October.

Purchasing activity fell for the eighth consecutive month. However, companies said that lower costs of metals and plastics balanced price increases for energy and chemicals.

CIPS CEO David Noble said: “Consumer confidence looks like it is translating into increased demand for consumer goods, unlike the intermediate and investment sectors, which continue to retrench.

“Regrettably, until on-going macro issues have been addressed, the situation is unlikely to change dramatically.”

Rob Dobson, senior economist at Markit, said: “The renewed recession in the eurozone and sluggish growth further afield clearly remain big worries for UK producers, hitting exports. However, at the same time, demand in home markets remains frustratingly weak. Destocking and cutbacks in business expansion plans have hit sales of intermediate and investment goods to domestic customers.

“On a brighter note, producers of consumer goods indicated that business is holding up well, with output growth surging to a near two-year high.”

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