Industry Press Releases

UK Manufacturing recovery remains on track at end of 2013

Monday, Jan 06, 2014
Pap’Argus Manufacturing PMI at 57.3 in December The UK manufacturing sector ended 2013 on a positive footing. December saw rates of expansion in production and new orders both remain among the highest in the 22-year survey history, leading to a pace of job creation close to November’s two-and-a-half year record. Companies benefited from strengthening domestic market conditions and a solid bounce in incoming new export orders. The seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) posted 57.3 in December, down slightly from November’s 33-month high of 58.1, but still a level indicative of a robust improvement in overall operating conditions. Moreover, the average PMI reading for the final quarter as a whole (57.2) was the highest since Q1 2011. Manufacturing output rose for the ninth successive month in December, underpinned by rising levels of incoming new work and efforts to clear backlogs of work. Meeting the needs of current and existing contracts also led to a further solid reduction in post-production inventories. Subsequently, the stocks of finished goods to new orders ratio posted one of its highest readings in the survey history to date (albeit below November’s series record). The level of new export business increased for the ninth consecutive month in December. However, the rate of growth eased to the weakest since September. UK manufacturers reported improved demand from Brazil, China, Ireland, Russia and the USA. December data signalled an eighth successive monthly increase in manufacturing employment. The rate of jobs growth was the second-strongest in the past two-and-a-half years, down only slightly from that registered in November. Higher employment reflected the increases in production and new orders. On the price front, average input costs and output charges both rose at faster rates in December. Purchase price inflation accelerated to a 28-month high, pushed up by the increased costs of commodities, energy, meat, paper, packaging, polymers and timber. There were also some reports that suppliers were raising their prices in response to increased raw material demand and shortages of certain inputs. Concurrently, average vendor lead times lengthened for the seventh month in a row. Output charges rose at the fastest clip since September 2011. Where an increase in factory gate prices was recorded, this was linked to escalating raw material costs. There were also reports of charges being raised in response to improved demand. Rob Dobson, Senior Economist at survey compilers Markit said : “UK manufacturing’s strong upsurge continued at the end of 2013, with rates of growth in production and new orders still among the highest in the 22-year PMI survey history. On its current track, the sector should achieve output growth of over 1% in the final quarter while filling around 10-15 thousand jobs, continuing its positive contributions to both the broader economic and labour market recoveries. “The domestic market remains resurgent and is a major factor driving production and new order inflows higher. UK exporters are also finding pockets of strength, with sales of capital and intermediate goods rising solidly to destinations such as Brazil, China, Ireland, Russia and the USA. “With the manufacturing sector still some 9% off its pre-crisis peak production, the question everyone wants answering is whether this upturn can develop into a self-sustaining recovery. The news is still good on this score, as growth is coming from a broad base that should help keep the rebound on track during the early stages of 2014. “Output and new orders are rising across all manufacturing sub-sectors and also at SMEs and large-scale producers. The strong performance of intermediate goods manufacturers suggests that firms are refilling their warehouses, while robust growth at consumer and capital goods producers indicates that household and investment spending are also still playing a key role.” David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply said : “UK manufacturing ended 2013 on a high and with all signs of powering ahead into 2014. The rate of production and new order growth remained well above the long-run survey average, rounding off the best overall quarterly performance for the PMI since Q1 2011. The sector’s broad based expansion was underpinned by strong domestic demand and improved export orders, all of which are signs of an underlying trend of continuing growth going into the New Year. “Higher demand and new orders in December resulted in increased levels of employment in the manufacturing sector for the eighth consecutive month. Purchases of new materials also rose solidly reflecting the ongoing increases in production requirements. Concurrently this is putting a distinct pressure on suppliers and on delivery times. “The only area of concern is the cost inflationary pressure which continued to build up during this final month, with input price inflation hitting a 28-month high.”