Tuesday 25th Oct 2016 - Logistics Manager

Manufacturing growth continues – Markit/CIPS survey

Manufacturing continued its “marked rate of expansion” in May, according to the Markit/CIPS Purchasing Managers’ Index. The index steadied at 58.0, in line with April’s fifteen-and-a-half year high and has now remained above the no-change mark of 50.0 for eight consecutive months.

Growth in new work was only slightly below April’s six-year peak. Meanwhile, increased demand from China, Europe, the US, the Middle East and Africa led to a further near survey-record increase in new export orders. A number of firms indicated that the relatively weak sterling exchange rate continued to aid sales efforts in overseas markets, the report said.

“The latest survey suggested that the inventory cycle remains supportive of future production growth. May saw manufacturers’ stocks of finished goods depleted at a marked rate that was the fastest since last October and the new orders-to-inventory ratio rise to a seven-month high. There was also anecdotal evidence from manufacturers that part of the gain in new orders reflected clients rebuilding their stock holdings.”

David Noble, chief executive at the Chartered Institute of Purchasing & Supply, said: “The strength of recovery of the UK manufacturing sector has taken everyone by surprise – this time last year, the industry was on its knees.

However, he warned: “Problems in countries such as Greece and Spain have strengthened the pound against the Euro recently and could also have a severe impact on the Eurozone economy. Given the euro countries are Britain’s biggest trading partners, any double-dip recession there would undoubtedly damage the UK manufacturing sector.

“There are also additional troubles looming on the horizon which could constrain the pace of recovery. The boost from the inventory cycle will eventually wane, as firms stop balancing their stock, meanwhile, the new government’s austerity measures will undoubtedly dampen the domestic market. Despite all this, the increase in manufacturing jobs is very good news.”