UK Manufacturing sector grows for the sixth consecutive month

manufacturing

The UK manufacturing sector has suffered long-term decline in recent years, and currently accounts for around just 12% of national output, half of what it was 30 years ago.  However, it remains a crucially important part of the economy, employing around 2.6 million people. So, the continued growth in the sector is great news for the country as a whole as it will lead to manufacturers expanding the factories and creating more jobs.

According to the Markit/CIPS Purchasing Managers’ Index, UK manufacturing activity continued to expand in September, growing for the sixth consecutive month albeit at a slower pace than in August. The report noted a slip to 56.7 in the month from August’s 57.1, but it was still significantly above the 50-mark that indicates expansion. Growth in output and new orders remained close to August’s 19-year high.

However, export business growth was weaker than hoped, although the CBI’s monthly industrial trends survey noted that export orders had actually grown with a number of companies. Around 23% of industrial firms said that their export order books were actually running above normal levels, but when the number of companies that said growth had either not increased was taken into account, this showed a clear 6% uptick.

“UK manufacturing continues to boom. These numbers are encouraging in respect to the rebalancing of the economy, with goods production likely to provide a major stimulus to economic growth in the third quarter,” said Rob Dobson, senior economist at Markit. “However, we would expect to be seeing far stronger export gains than companies are currently reporting, especially with the eurozone showing signs of finally pulling out of recession.”

Stephen Gifford, CBI Director of Economics, said that another month of positive results shows that the UK’s recovery is gathering pace. “Firms are more upbeat about growth prospects in the coming quarter than at any time since 1995,” he commented.

On top of this, employment in the sector kept up its upward trajectory, improving on August and maintaining a period of jobs growth that goes back as far as April this year.

Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said: “This is another solid month for manufacturing with output, orders and employment all up, paving the way for a decent quarter of growth across the sector. The good run of indicators should continue beyond the end of this year with some expansion in manufacturing taking place in Europe, Asia and the US.”

The economic thinktank, the CEBR, added its weight to the debate, saying: “This was the fifth consecutive month during which employment has risen in the manufacturing sector. The staffing-level recovery was broad-based, as payrolls increased across all manufacturing industries, besides timber and paper.

“Overall, rising employment in the manufacturing sector has the potential to decrease the UK unemployment rate – which still stood at an elevated 7.7% over April-June 2013 – or at least mitigate the effect of public sector payroll reductions,” it concluded.

However, Hopley warned that the economy was far from out of the storms just yet, adding that the sector faced headwinds that could restrict its expansion in the coming months.

“Ramping up production to meet growing demand given the persistent weakness in investment is one,” she explained. “A second concern is inevitably that the positive outlook globally will be sustained.”

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