CIPS News


Strong UK manufacturing rebound continues

CIPS 3 February 2014

Improved domestic demand and rising export orders support solid output growth

Strong UK manufacturing rebound continues

Data collected 13-28 January 2014

Key points:

  • Manufacturing PMI at 56.7 in January
  • Improved domestic demand and rising export orders support solid output growth

Employment increases for ninth straight month 

Summary:

The UK manufacturing sector made a positive start to 2014. Rates of expansion in output and new orders remained well above their respective long-run trends, supporting a solid increase in payroll numbers.    

The seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) posted 56.7 in January, down from December’s 57.2. Although the PMI currently stands at its lowest level in three months, it is still well above the series average of 51.3. The headline index has signalled an improvement in operating conditions in each of the past ten months.

The strong upturn in manufacturing production was maintained in January, as companies scaled up output in response to stronger inflows of new orders. There were reports of improved demand

The latest expansion in new export orders was broad-based by source, with UK manufacturers mentioning improved demand from North America, mainland Europe, Asia, Brazil, Scandinavia and the Middle-East. Moreover, the ongoing improvement in global market conditions drove the rate of increase in new export business to a near three-year record.

The ongoing rebound in the sector led to further job creation at the start of the year. January saw employment increase for the ninth successive month, with the rate of jobs growth remaining close to November’s two-and-a-half year high.

The latest rise in payroll numbers was broad-based. Increases were reported by SMEs and large-sized companies and across the consumer, intermediate and investment goods sectors.

Average purchasing costs rose for the ninth straight month in January, reflecting higher prices paid for a number of inputs (including timber and related by-products). However, the rate of increase eased to its weakest since last July. The steepest rise in input prices was registered in the intermediate goods sector. In contrast, rates of inflation eased

sharply at consumer and investment goods producers.

The combination of higher purchasing costs and improved demand led to a further solid increase in average selling prices in January. Output charges rose for the seventh successive month and at a pace close to December’s 27-month record. Selling prices rose at medium and large-sized companies, but were broadly unchanged at small-scale producers.        

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply:

“The continued improvement in global market conditions has ushered in a broad based and fully fledged recovery in manufacturing. Sustaining growth close to November’s near record numbers, the makers’ march continued in January 2014, embodied by ever faster rates of new business growth and ongoing increases in employment levels.   

“Whilst domestic demand continues to climb, it is the expansion overseas that promises continued growth. The illusive export market has long been heralded as the key to unlock UK economic growth and in manufacturing appears to be coming to fruition, with new business rates climbing fastest in nearly three years.

“This has enabled firms large and small, across the sector, to invest in staff, marking the ninth successive month on month increase in employment. The rate of growth in jobs has also remained close to November’s two and a half year high. Whilst costs climbed yet again, firms were able to pass these on to customers, a further sign of bullishness across the sector.”

For press enquiries, call the Press office on 01780 756777or email: press@cips.org. The PMI data is available to purchase.

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