Low commodity prices boost UK manufacturing

1 December 2015

UK manufacturing kept up its positive start to the final quarter, with growth in November showing only a marginal fall from that seen in October.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index dropped to 52.7 in November, down from October’s 16-month high of 55.2 (revised from 55.5).

A decrease in purchasing costs was largely responsible for the figures, with the rate of deflation among the fastest seen in the index’s 24-year history.

Lower input costs were generally linked to falling global commodity prices and meant output charges were reduced for the third successive month, as companies partly passed on the decrease in costs.

Manufacturing production expanded for the thirty-second successive month in November, underpinned growing new business.

While growth was slower than in October it remained ahead of long-term averages. Overall growth remained firmly centred on large companies and was unmatched among SMEs.

Consumer goods producers saw strongest results, though the investment goods sector also performed solidly. Intermediate goods producers experienced a sharp growth slowdown.

New export business at UK manufacturers continued to grow in November as new work from overseas clients rose for the third straight month. New business was reported mainly from clients based in the USA, Germany, Sweden, Turkey, the Middle East, Japan, China and other Asia-Pacific nations.

David Noble, group CEO, CIPS, said: “Market forces continued to be strong, although at a softer and less robust pace than last month, as purchasing activity continued along its upward trend.

“Buoyed up by continued falls in commodity prices and a steady rise in new export orders and improved domestic demand, once again larger companies took advantage of these ripe conditions following last month’s trend.”

Rob Dobson, senior economist at Markit, said: “UK manufacturing is moving back into expansion mode during quarter four, as it starts to reverse the losses sustained in the prior quarter. Although the pace of growth so far is only very modest, it positions manufacturing as less of a drag on the broader economy.”

 

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