Member Article

Manufacturing levels up towards end of 2012

Manufacturing levels in the UK rose at faster rates in December, and the labour market within the sector appeared to stabilise.

According to the Markit/CIPS Purchasing Manager’s Index, manufacturing reached a 15-month high of 51.4 points, as the average over 2012 was 49.2.

Output increased for a second consecutive month, as the growth rate accelerated to a 20-month high.

The biggest gains were reported by consumer and intermediate goods producers, and there was a modest increase in capital goods production.

Improved demand from the domestic market was identified as the force behind the increased output, as new orders increased for the second month in a row, despite a decrease in new export orders.

Overseas demand fell across the whole year, and Markit remarked that conditions in the Eurozone, the UK’s main export partner, remained “subdued.”

Manufacturing employment declined marginally in December, attributed to company restructuring, natural wastage and non-replacement of leavers.

Rob Dobson, Senior Economist at survey compilers Markit: “UK manufacturing exited 2012 on a positive note, with December’s PMI data signalling a reassuringly solid return to growth for the sector. However, this does little to change the view that the sector contracted over the fourth quarter as a whole following the temporary growth surge of 0.7% in the third quarter.

“The domestic market remained the main spur for growth of production and new orders in December, although there are also signs that global trade flows are stabilising as China and the US strengthen and the downturn in the Eurozone eases. If the recovery in overseas markets continues to build at the start of 2013, this would be of major benefit to UK exporters.”

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply: “In what has been a difficult year for the manufacturing sector, it is very encouraging to see 2012 end on a high, with a second consecutive increase in output and the strongest rate of growth in 20 months presenting a more solid platform for 2013. This is largely a reflection of improved performance in the domestic market.

“However, the sector is far from out of the woods. The decline in new export orders demonstrates that challenging global economic conditions and the Eurozone crisis continues to act as a drag. Moreover, the slight fall in employment, increased costs and spare capacity are warning signs for the year ahead. “While December’s figures do not reverse the disappointing performance over the year as a whole, manufacturers will hope that the solid upturn in production volumes is the first sign of a more stable footing going into 2013.”

Manufacturers reported higher purchasing costs for chemicals, energy, food products and plastics and there were reductions in purchasing activity, stocks of raw materials and holdings of finished products.

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply: “In what has been a difficult year for the manufacturing sector, it is very encouraging to see 2012 end on a high, with a second consecutive increase in output and the strongest rate of growth in 20 months presenting a more solid platform for 2013. This is largely a reflection of improved performance in the domestic market.

“However, the sector is far from out of the woods. The decline in new export orders demonstrates that challenging global economic conditions and the Eurozone crisis continues to act as a drag. Moreover, the slight fall in employment, increased costs and spare capacity are warning signs for the year ahead.

“While December’s figures do not reverse the disappointing performance over the year as a whole, manufacturers will hope that the solid upturn in production volumes is the first sign of a more stable footing going into 2013.”

This was posted in Bdaily's Members' News section by Tom Keighley .