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Surprising rebound in UK manufacturing

Good news for the UK manufacturing sector. Output expanded in January at the fastest rate since March 2011. There was an increase in new orders together with a stabilisation in employment. Also, average input prices fell for the third month running causing an easing in the cost pressures which had been facing the sector.

The improvement in manufacturing may help prevent another recession.

These findings are from the Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) which rose to an eight-month high in January of 52.1, compared to 49.7 in December. Any figure above 50 shows that the sector is in expansion mode.

According to the survey companies reported an increased willingness to spend among some UK clients and a further increase in new export orders. There were reports of improved export orders from Brazil, China, the Middle East and the US.

Rob Dobson, Senior Economist at Markit pointed out that: “Growth is nowhere near the surging highs of 12 months ago, but this is nonetheless a vast improvement on the 0.9% reduction in output seen at the end of last year. Manufacturing was a key area of weakness which caused the UK economy to contract in the final quarter…”

The employment picture was broadly unchanged in January, but whilst some of the larger companies were still cutting jobs there was actually an increase in employment at small and medium-sized enterprises. As we can expect these to be some of the more dynamic firms in the sector, this is decidedly good news.

Also, the improvement in the sector as a whole gives us a degree of optimism that the UK economy can avoid falling back into recession.

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Posted in Manufacturing, UK economy, UK industry

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