Solid domestic market drives growth of output and employment

CIPS 1 December 2014

Manufacturing PMI at four-month high of 53.5

Markit/CIPS UK Manufacturing PMI® shows solid domestic market drives growth of output and employment.

- Manufacturing PMI at four-month high of 53.5
- Solid domestic order inflows offset subdued trend in new export orders
- Job creation accelerates

The upturn in the UK manufacturing sector continued in November. Although the rate of growth in recent months has remained weaker than in the opening half of the year, the latest survey month nonetheless saw further solid expansions of output, new orders and employment.

The domestic market remained the main pillar supporting the upturn, while the trend in new export orders remained subdued.

The seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) posted 53.5 in November, up slightly from 53.3 in October, a four-month high and a level above the no-change mark of 50.0 for the twenty-first successive month.

Manufacturing production rose for the twentieth successive month in November, as companies scaled up output in response to improved inflows of new work. Solid domestic market conditions, promotional activity and new client wins were all factors driving the latest rise in new work.

Although slower than in the first half of the year, the expansions in manufacturing production and new business remained broad-based. November saw output and new orders increase in the consumer, intermediate and investment goods sectors and also across SMEs and large-sized companies.

Manufacturing employment increased for the nineteenth consecutive month in November, as the ongoing upturn in the sector continued to filter through to the labour market. Moreover, the rate of job creation recovered to reach a four-month high.The sharpest increases in employment were signalled by SMEs, although large-sized companies also saw a modest gain in headcounts.

Price pressures remained subdued in November. Average output charges rose only marginally and to the weakest extent during the current 17-month
period of increase. Meanwhile, average input prices fell for the third straight month. Companies reported lower prices paid for chemicals, commodities, food raw materials, oil, and plastics. There was also some mention of the exchange rate reducing the price of imported materials.

The trend in new export orders remained weak during November, as exporters faced a combination of subdued global market conditions and a relatively strong sterling-euro exchange rate. New export business decreased for the third consecutive month, with companies reporting lower order inflows from the EU, Russia and emerging markets.

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply:“The domestic market is this month’s stimulus of growth, supporting continued stability and a good level of confidence.

“Though progress is not as robust as in the first half of the year, balance is being restored as output, orders and employment levels all rise at moderate if unexciting rates. This domestic uplift has been the counterbalance to disappointing export opportunities with the strength of sterling and lack of activity from emerging markets having an impact.

“Procurement and supply chain professionals report lower costs for commodities, and particularly oil which is a welcome development for a sector often hit by strong prices for energy. General purchasing activity has also been slower as stocks remain at steady levels and manufacturers have what they need.

“Manufacturing appears to be a safe pair of hands and moving in a positive trajectory in the UK economy as we await detail of the Chancellor’s statement this week.”

The December 2014 Report on Manufacturing will be published on:
Friday 2nd January 2015 at 09:30am.

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