Manufacturing growth rate declines as optimism falters

MANUFACTURING in the West Midlands declined during July but the sector is still growing, according to latest data released today.

The latest Lloyds TSB West Midlands PMI report showed total activity rose at a solid rate, supported by a fall in outstanding business and a moderate increase in inflows of new orders.

The West Midlands Business Activity Index – which tracks the combined output of the region’s manufacturing and service sectors – fell marginally from 54.8 in June to 54.3 in July, having been at 54.0 in May. Anything above 50 indicates growth.

The reading extended the current sequence of output growth to 25 months, and was broadly in line with the UK average (54.4).

However, long term the prospects may not be quite so strong.

A new report released today by the CBI indicates sentiment about the general business situation has fallen among the UK’s SME manufacturers. Furthermore they expect no growth in demand and output over the coming quarter, and are reappraising their business plans as a result.
 
In a study of more than 400 SMEs around the country, the CBI’s latest quarterly SME Trends Survey shows just 18% of manufacturers being more optimistic than three months ago, and 28% said they were less optimistic. The resulting balance of -10% marks the first notable decline in sentiment in two years.

The West Midlands activity report shows output for July was supported by a continued fall in outstanding business and a moderate increase in the volume of new orders. New contracts in the West Midlands private sector have risen continuously since July 2009, but the rate of increase in July was the slowest in 23 months.

Overall trends in activity and new business masked differences in performance between manufacturing and services in July.

In the former sector, robust gains were recorded in both cases, while service providers posted marginal falls in both new work and activity. Private sector employment in the West Midlands rose for the 10th month running in July.

The trend of improved employment levels reported in the West Midlands was in contrast to the UK average, which registered a fall in workforce levels for the first time since August 2010.

Backlogs of work fell for the sixth month running and at their greatest pace since November 2009. Depletion of work-in-hand was heavily centred on services, as manufacturers posted only a modest fall in outstanding business.