New data puts UK manufacturing growth at 10-month high

King of manufacturing James Dyson and the bladelsss fan - New data puts UK manufacturing growth at 10-month high

King of manufacturing James Dyson with the bladelsss fan

March rounded off a positive start to 2012 for UK manufacturing, but conditions in the sector remain tough overall according to the Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI)

The data follows more positive news after the CBI released figures this morning indicating that the UK’s financial services sector grew at a pace well above average in the first three months of 2012.

According to Markit, output and new orders expanded throughout the opening quarter of 2012, with rates of increase ticking higher at the end of Q1.

However, the increase in output was heavily supported by a depletion in backlogs of work and record inventory building. Cost inflationary pressures are also intensifying due to high oil and metal prices.  

The seasonally adjusted index rose to a 10-month high of 52.1 in March, from a revised reading of 51.5 in February.

“The continued growth in manufacturing over the past few months points towards a more sustained period of improvement in the sector, and less chance of manufacturing acting as a drag on the overall economy,” said David Noble, CEO at the Chartered Institute of Purchasing & Supply.

The PMI has now signalled expansion for four successive months, with its average reading in Q1 2012 (51.8) the highest since the second quarter of last year.

“Improved inflows of new orders and efforts to clear backlogs of existing work led to a further increase in production during March. However, with output still expanding at a steeper pace than new business, stocks of finished goods built up in warehouses,” said Markit in a statement.

While growth in exports to emerging markets was signalled as a positive factor this was linked to a decline in demand from Europe.

High oil prices were also singled out as an unwelcome pressure for businesses.

“A major cause of concern among manufacturers is the recent upsurge in input prices, which mainly reflects high oil prices. While there are few signs currently of this passing through to factory gate prices, it is creating an unwelcome pressure on margins as strong competition restricts firms’ pricing power.

“Inflation hawks will be watching this trend closely, as margins can only be squeezed so much until producers need to raise prices,”  said Rob Dobson, senior economist at Markit and author of the Markit/CIPS Manufacturing PMI said.

Added Dobson: “UK manufacturing has made a brighter than expected start to 2012, with PMI data pointing to output growth of around 0.3 per cent in the first quarter.

“This is obviously nowhere near a strong pace, but it is at least sufficient to prevent the sector from remaining a drag on broader GDP growth. Inflows of domestic and export orders also showed some improvement in March, but exporters are having to tap markets further afield as conditions in the Eurozone remain lethargic.”

Follow me: @bex_hobson and @LondonLovesBiz

Social Bookmarks