Job creation up as UK manufacturing activity reaches highest level for seven months

2 March 2015

Growth in the manufacturing sector has strengthened since the start of this year leading to further job creation, according to a survey of buyers.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index rose to 54.1 - its highest level for seven months - up from 53.1 in January, and 52.5 in December 2014. The PMI has now posted a reading above 50, indicating expansion in the sector, for the past two years.

Manufacturing employment in the UK increased for the 22nd consecutive month, to a three-month high in February. Companies reported further job creation as a result of the upturn for both SMEs and large companies.

Growth was led by the consumer goods industry, although solid increases in output were also registered at intermediate and investment goods producers. Companies have benefited from solid new order inflows from the domestic market.

This offset lower new export order volumes, which deteriorated for the fourth time in the past five months according to the survey, reflecting both the appreciation of pound sterling and subdued conditions generally.

The sharp decrease in oil prices earlier in the year continued to filter through to manufacturers’ input costs and average purchase prices fell at a substantial pace. The survey also mentioned lower costs for chemicals, energy, food, raw materials, oil and oil by-products, plastics and timber.

“On the inflation front, price pressures remained on the downside in February,” said Rob Dobson, senior economist at Markit. “The slump in oil prices earlier in 2015 is filtering through on the cost side, meaning manufacturers’ input prices are falling at a double-digit annual pace.

“Although a welcome respite for margins, lower costs are being partly passed on in the form of reduced selling prices, adding to the short-term deflationary pressures in the economy. Waning inflation therefore looks to set to continue.”

“Scratching beneath the surface and we see a lopsided upturn, with the prime driver being a strong upsurge in new orders and production at consumer goods producers,” he added.

David Noble, group CEO, CIPS, said that even though there was some growth in the Eurozone and elsewhere, it did not “translate strongly enough to support increased new export orders”.

But he added the survey results demonstrated the sector is in a “buoyant mood”. “This is good news for the UK economy as higher staffing levels mean more opportunity for economic expansion.”

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