Manufacturing sector ends 2012 on a high

2 January 2013

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2 January 2013 | Anna Reynolds

The Markit/CIPS Purchasing Manager’s Index (PMI) for manufacturing recorded a 15-month high of 51.4 in December.

The reason for the sector’s return to growth was an increase in manufacturing output following improved domestic demand. The total volume of new work increased for the second month running despite new export orders falling. This was due to subdued conditions in the Eurozone, the UK’s main export partner. A figure above 50 indicates growth.

Rob Dobson, senior economist at Markit, said: “The domestic market remained the main spur for growth of production and new orders in December, although there are also signs that global trade flows are stabilising as China and the US strengthen and the downturn in the Eurozone eases. If the recovery in overseas markets continues to build at the start of 2013, this would be of major benefit to UK exporters.”

Employment in the sector declined for the eighth consecutive month although the rate of job losses was the slowest over the period. Company restructures, natural wastage and the non-replacement of leavers were the main reasons for decline.

Input price inflation surged in December, with the rate of increase reaching a nine-month high. Manufacturers reported higher purchasing costs for chemicals, energy, food products and plastics, while some suppliers raised their prices and increased their costs for imported goods.

Manufacturers remained cautious about costs during December, which lead to further reductions in purchasing activity and stocks of raw materials while low inventories at suppliers led to continued delivery delays.

CIPS CEO David Noble said: “While December’s figures do not reverse the disappointing performance over the year as a whole, manufacturers will hope that the solid upturn in production volumes is the first sign of a more stable footing going into 2013.”

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