After a few months of mild stagnation in the UK manufacturing sector, many firms are this week welcoming news that activity increased during November, putting an end to fears that the boom period experienced over summer was something of a fluke.
Last month’s results point towards a further strengthening of the sector going into the New Year, a forecast which paints a good picture for the UK economy as a whole.
According to the Markit/CIPS Purchasing Managers’ Index, November brought with it a reading of 53.5, outperforming October’s 53.3 result. Although not quite matching the steep rises seen earlier in the year, the monthly growth marked the highest reading in four months and lends hope to manufacturing firms that a stable pace of growth is indeed achievable in today’s market conditions.
However, future growth could continue to be limited by the issues currently facing businesses in the Eurozone, economists have warned. November’s strong performance, according to the survey, was entirely due to the stability of domestic demand as opposed to an uptick in overseas orders, indicating that UK manufacturing firms will have to rely upon their domestic contemporaries in associated industries rather than turning to neighbouring economies for future work.
World First chief executive Jeremy Cook says; “November’s UK release paints a similar picture to that seen in October, in that the domestic picture is solid and strong but growth in export markets – particularly in the EU and emerging markets – is worse.”
Fortunately, Berenberg economist Rob Wood does not think that this will necessarily put an end to growth in the manufacturing industry, saying; “With cheaper oil, the UK recovery should get its fizz back next year.”
The results came as something of a surprise to City economists, given that the roundly accepted forecast was for a 0.2 per cent dip in performance to a reading of around 53. However, a rise in domestic demand allowed output growth to increase for the 20th consecutive month – as a result, manufacturing sector employment growth also rose, this time for the 19th month in a row.
When compared to the rest of Europe, the UK manufacturing sector is performing incredibly well, with only Spain achieving a higher reading of 54.7 on the Purchasing Managers’ Index. Germany, on the other hand, saw its PMI slip to below 50, making it the third major Eurozone country to enter contraction.
Should conditions in the Eurozone improve within the next few months, it is doubtless that UK manufacturers will benefit from an uptick in overseas orders. However, Markit senior economist Rob Dobson claims that this is not necessarily vital for manufacturers at present.
He continues; “In the lead up to the Chancellor’s Autumn Statement, the November PMI survey shows the UK manufacturing sector continuing its solid expansion.
“Despite easing from the stellar pace set in the first half of the year, growth is still coming from a broad base that will aid its sustainability.”
