Positive end to 2013 for manufacturers
THE UK manufacturing sector ended 2013 on a positive footing, latest figures have shown.
December saw rates of expansion in production and new orders both remain among the highest in the 22-year PMI survey’s history, leading to a pace of job creation close to November’s two-and-a-half- year record.
Companies benefited from strengthening domestic market conditions and a solid bounce in incoming new export orders.
The seasonally adjusted Markit/CIPS Purchasing Manager’s Index posted 57.3 in December, down slightly from November’s 33-month high of 58.1, but still a level indicative of a robust improvement in overall operating conditions.
Moreover, the average PMI reading for the final quarter as a whole (57.2) was the highest since Q1 2011.
Manufacturing output rose for the ninth successive month in December, underpinned by rising levels of incoming new work and efforts to clear backlogs of work. Meeting the needs of current and existing contracts also led to a further solid reduction in post-production inventories.
Subsequently, the stocks of finished goods to new orders ratio posted one of its highest readings in the survey history to date – albeit below November’s series record.
The level of new export business increased for the ninth consecutive month last month. However, the rate of growth eased to the weakest since September. UK manufacturers reported improved demand from Brazil, China, Ireland, Russia and the USA.
December data also signalled an eighth successive monthly increase in manufacturing employment.
The rate of jobs growth was the second-strongest in the past two-and-a-half years, down only slightly from that registered in November. Higher employment reflected the increases in production and new orders.
On the price front, average input costs and output charges both rose at faster rates in December.
Purchase price inflation accelerated to a 28-month high, pushed up by the increased costs of commodities, energy, meat, paper, packaging, polymers and timber. There were also some reports that suppliers were raising their prices in response to increased raw material demand and shortages of certain inputs. Concurrently, average vendor lead times lengthened for the seventh month in a row.
Output charges rose at the fastest clip since September 2011. Where an increase in factory gate prices was recorded, this was linked to escalating raw material costs. There were also reports of charges being raised in response to improved demand.
Rob Dobson, senior economist at survey compilers Markit, said: “UK manufacturing’s strong upsurge continued at the end of 2013, with rates of growth in production and new orders still among the highest in the 22- year PMI survey history. On its current track, the sector should achieve output growth of over 1% in the final quarter while filling around 10-15 thousand jobs, continuing its positive contributions to both the broader economic and labour market recoveries.”
Richard Halstead, a regional director at EEF, the manufacturers’ organisation, said: “Manufacturers ended the year on a strong note and rising production, new orders and increased employment in December provided a springboard for growth going into 2014.
“Surer signs of a manufacturing recovery in Europe together with steady growth both at home, in the US and emerging markets should align to support solid expansion of UK manufacturing in the year ahead. However, while we can hope to see more of the ground lost during the recession made up this year, we must also start to see new investments coming on stream if the sector is to secure a sustainable, long-term recovery.”
Mike Rigby, head of manufacturing, Barclays, added: “The sector has made good strides forward since the start of 2013 and the positive end to the year points to a strong 2014 for manufacturers. The main ingredients are in place, including stable FX rates, stable commodity prices, a recovering UK economy and a willingness from manufacturers to invest in R&D. If the sector continues to keep confidence and momentum up there’s no reason why it can’t outperform the UK economy in 2014.”
