UK manufacturing sparks into life

1 February 2012

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1 February 2012 | Adam Leach

The new year got off to a good start for British manufacturers as activity in the sector hit its highest level since March 2011, according to today’s figures.

The Markit/CIPS Manufacturing PMI for January recorded a figure of 52.1 for the month; a stronger performance than December’s revised figure of 49.7 (the original score was 49.6). The expansion in activity came as production rose for the second consecutive month and was joined by a rise in new orders and the completion of work backlogs.

Particularly positive for the sector was the finding that manufacturers are seeing an increased willingness to spend by UK clients and a boost in export orders. Raised output, reported for the first time since April 2008, saw stocks of finished goods increase. Manufacturers also reported lower input costs as commodity prices eased and, as a result, output costs rose at their slowest rate for 27 months.

However, owing to shortages of certain inputs and shipping difficulties, vendor lead times lengthened for the third consecutive month. Manufacturers reported a fall in stocks and reduced holdings in the business to ensure stable cash flow.

Rob Dobson, senior economist at Markit, said: “Manufacturing was a key area of weakness which caused the UK economy to contract in the final quarter, so this surprising rebound in January means a return to recession is by no means a certainty.”

David Noble, CIPS CEO, said: “The UK manufacturing sector has sprung to life in the first month of 2012 to defy any economic gloom, but it is too early to say whether this trend is sustainable.

“The marked decline in input prices is good news for the sector’s overall profitability. The boost in output is also welcome, but in reality is bolstered by manufacturers working through existing backlogs which can only be a short-term fix.”

South Africa also saw a return to growth in purchasing activity as the Kagiso PMI for January reported a figure of 53.2, stronger than December’s performance of 49.4. The sector’s increase in activity, the highest since June last year, was supported by a 9.0 rise in new sales orders and a 3.9 rise in business activity.

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