Markit/CIPS UK Manufacturing PMI® shows manufacturing PMI edges higher at start of 2015:
- Manufacturing PMI at 53.0 in January
- Growth of output and new orders ticks higher
- Purchase prices fall at fastest pace in over five-and-a-half years
UK manufacturing started 2015 on a firmer footing, as growth of output and new orders ticked higher following the slowdown seen through much of the latter half of 2014. The big mover during January was the trend in purchasing costs, as the recent slump in oil prices fed through to the steepest drop in input costs since May 2009.
The seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) rose to 53.0 in January, a shade higher than December’s revised reading of 52.7 (originally published as 52.5). The headline PMI has remained above the neutral 50.0 mark in each month since April 2013.
Manufacturing output expanded for the twenty-third consecutive month in January, underpinned by a further increase in incoming new orders. The domestic market remained the prime driver of improved new order inflows. Solid output growth was registered at both intermediate and investment goods producers. However, the rate of growth in the consumer goods output ground to a near standstill pace.
There was also a modest increase in new business from overseas, representing the first meaningful improvement in new export order volumes registered for five months. Companies reported increased demand from France, Germany, Japan, the Middle East, Poland and the USA.
The ongoing upturn in the manufacturing sector encouraged further job creation during the latest survey month. Staffing levels rose for the twenty-first successive month, although the rate of increase eased to a three-month low. Higher employment aided efforts to reduce backlogs of work at manufacturers, leading work-in-hand volumes to fall sharply.
January data signalled a steep drop in average input costs. The rate of purchase price deflation accelerated sharply to its steepest for over five-and-a-half years. Exactly 31% of companies reported a decline in input costs, which many linked to the recent slump in international oil prices. This had reduced the cost of energy, transportation and oil by-products.
Lower purchase prices filtered through to average output charges in January, as companies reduced their selling prices for only the second time during the past five years. However, the rate of decline in output charges was only mild and substantially less marked than that signalled for input costs.
David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply:
“Manufacturers were picking up the pace a little as the sector reported a marginal increase in activity driven by domestic demand which continued to show signs of life. Though the overall index showed a modest increase, it may be enough to allay fears of an overall slowdown in the UK economy as the Eurozone continues to experience problems.
"This month’s biggest trend for procurement and supply management professionals is the positives from the drop in oil prices and the effects on general purchasing prices which showed the biggest fall since May 2009 and which also had an effect on transportation costs and oil derivative products.
"Vendor performance continued to show pressures, but less so than in recent months. The further increase in employment levels show that SMEs and corporates alike are gearing themselves up to meet the demand brought on by new work and backlogs, filling vacancies and upskilling current staff. The fall in purchasing volumes show stock levels were at sufficient levels to meet demand.
"The world’s eyes will be focussed on reactions to Eurozone deflation and a response to the UK’s disinflationary pressures and how all this will be played out for manufacturing in the months ahead.”
The February 2015 Report on Manufacturing will be published on:Monday 2nd March 2015 at 09:30