Poor weather blamed for manufacturing sector contraction

1 March 2013

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1 March 2013 | Anna Reynolds

The Markit/CIPS Purchasing Manager’s Index (PMI) for manufacturing returned to contraction in February, recording a figure of 47.9.

This was lower than the 50 mark, indicating no change, and a fall from January's figure of 50.8. New orders fell for the second successive month and at the sharpest rate since last July. Reasons for this were tough market conditions at home and abroad as well as poor weather.

New export orders also declined, particularly in Europe, but emerging markets remained a source of growth.

Employment in the sector fell at the quickest pace for 40 months, with a combination of redundancies and natural wastage, as larger enterprises made the steepest cuts.

Companies sought to recover profit margins by charging higher prices. There was evidence of successful negotiations with suppliers, although weakness of the pound was reported to have led to higher pressure on the cost of imported goods. Manufacturers also recorded the sharpest decline in purchasing activity during February for seven months.

CIPS CEO David Noble said: “After a positive January, February’s disappointing figures will serve as a reality check for the manufacturing sector. February witnessed the first contraction since November 2012, a situation exacerbated by poor weather, and will no doubt represent a dent in the confidence of the sector.

“Moreover, the sector seems to continue to grapple with the ongoing problems of playing hostage to European fortunes, while unable to fully take advantage of emerging growth markets.”

Chris Williamson, chief economist at Markit, said: “There are good reasons to believe the PMI may turn up again in March. First, the bad weather at the end of January looks to have had a knock-on effect to production and orders in February via disrupted deliveries. Second, the Chinese New Year holidays are having an increasingly disruptive impact on global trade flows as each year goes by and appear to have had a stronger than usual effect in February. Third, the weaker pound may help exporters in coming months.”

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