Mixed messages muddle manufacturing picture as polling day draws near
CONFLICTING pictures of the health of the UK’s manufacturing sector have emerged just days before the General Election.
The CBI’s latest Growth Indicator shows growth in the three months to April holding up at around the average pace since mid-2014.
However, the latest PMI manufacturing index fell to 51.9 in April from 54 in March.
Any figure above 50 still indicates growth so no one is pressing the panic button yet, however, it will make the final few days of the election campaign interesting as the Conservatives continue to try and convince voters the economy is safe in their hands.
The CBI said solid growth in the service sector had compensated for the weaker manufacturing performance, which has been hit by fluctuating export orders and the rising pound.
The business organisation has reiterated that it expects growth to pick up over the next three months, although it admits optimism has continued to decline slightly since the turn of the year.
The Growth Indicator, derived from CBI surveys of 756 businesses, brings together economic-activity data from a range of business sectors. The reading of +19% for the three months to April was little changed from the three months to March (+18%) and February (+19%).
The CBI said businesses expected growth to strengthen moderately in the months ahead, particularly in the retail and manufacturing sectors. The balance of expectations for output growth over the next three months (May – July) is +23%. That represents somewhat stronger growth than was recorded over the last three months.
Katja Hall, CBI Deputy Director-General, said: “UK economic growth appears resilient. Our surveys and member feedback indicate prospects for 2015 as a whole remain bright, with lower oil prices and inflation boosting household spending power and helping businesses, aside from the hit taken by the North Sea oil industry.
“Promisingly, there are early signs of stronger growth in the Eurozone, which should help UK exports. But the strengthening pound is undermining manufacturers’ competitiveness in the euro area, while uncertainty around the election seems to be knocking businesses’ investment plans.”
Commenting on the PMI data, Mike Rigby, Head of Manufacturing at Barclays, said: “The only obvious bright light in these figures is that staffing levels across the sector continue to rise. However, we mustn’t overlook that wage inflation is increasing competition which means that the uplift in hiring is not just to meet demand from new orders but also to backfill vacancies that already exist.
“Clear and easy access to labour is essential if manufacturers are to remain central to driving UK economic growth.”
