Manufacturing sector expansion continues in 2013

1 February 2013

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1 February 2013 | Anna Reynolds

The Markit/CIPS Purchasing Manager’s Index (PMI) for manufacturing continued to expand in January, recording a figure of 50.8 in January.

This was slightly lower than December’s 15-month high of 51.4, but remained above the neutral 50-mark, indicating growth for the second month running.

UK manufacturing production continued to expand at the beginning of 2013 following an increase in new orders and continued efforts to clear backlogs of work. The labour market also continued to stabilise following the job losses seen through much of the past year.

Manufacturing output grew at the fastest pace since September 2011, mainly due to an increase in consumer goods production. Companies reported a marginal increase in new orders for the third successive month, but this offset further reductions in new export orders, which fell for the thirteenth month in a row. Manufacturing firms linked lower volumes of new work from overseas to the ongoing weakness of European markets.

Average input prices rose for the fifth successive month in January, with costs rising across the consumer, intermediate and investment goods sectors. Companies reported higher prices paid for chemicals, energy, metals, packaging and plastics. Part of the increase in costs was passed on to clients in the form of higher average selling prices.

Manufacturers continued to be cost-cautious, with input buying volumes declining for the twelfth successive month. Meanwhile, stocks of purchases and finished goods were reduced further at the start of 2013.

CIPS CEO David Noble said: “On the surface this is good news for manufacturing and should be welcomed. However underlying factors suggest deep-rooted problems remain. Economic weakness in Europe is the primary issue affecting the industry, reflected in the continued scarcity of export orders during January and the fact that many firms remain cost-cautious in response to increased input prices.”

Rob Dobson, senior economist at Markit said: “A small gain in employment also suggests that some firms are becoming slightly less focused on cost reduction amid signs of stabilising order books, which should hopefully lead to further production growth in February.  

“However, with manufacturing only accounting for around 10 per cent of the economy, the survey will do little to assuage fears of a triple-dip recession, unless accompanied by an improvement in the services sector, which contracted at the fastest rate for two years in December.”

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