UK manufacturing sector picking up steam

Chris Papadopoullos
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Chancellor George Osborne gets election growth boost (Source: Getty)

The speed at which the UK’s manufacturing sector is expanding reached a seven-month high in January, new survey data show.

The manufacturing purchasing managers’ index (PMI) – a survey of private sector firms – rose to a score of 54.1 in February from January’s 53.1, according to figures released yesterday.
Any figure above 50 indicates expansion with higher figures marking faster growth.
Manufacturers reported stronger inflows of new orders from domestic based clients. It compared to a further weakening in export growth, which deteriorated for the fourth time in the last five months. “Even though the headline manufacturing PMI ticked up to a seven-month high, beneath the impressive headline trends we continue to see a story of a two-speed sector, with domestic demand strong but the external sector struggling,” said Andrew Goodwin, senior economic advisor to the EY Item Club – a group of economic forecasters.

Subdued oil prices helped factory output growth by keeping inputs cheap. Input purchases prices fell at a pace that was just shy of January’s 68-month record dip.
“The domestic economy is clearly showing the benefits of cheaper oil, which is not only helping to boost demand but is also allowing firms to both reduce prices and build margins,” Goodwin said.
February’s data also signalled that manufacturers had taken on more workers for the 22nd consecutive month.
Manufacturers currently employ eight per cent of the UK’s workforce and account for 10 per cent of the UK’s total output.
Despite robust expansion, manufacturing output remains below levels reached before the 2008 crisis.
Manufacturing output in the final three months of 2014 was 5.1 per cent below its pre-recession peak reached in the first three months of 2008, according to the latest figures from the Office for National Statistics.
“While domestic demand will likely remain key to UK manufacturers and export orders fell in February, there are welcome signs that activity in the Eurozone may finally be picking up which would be of significant help to export prospects,” said economist Howard Archer from market analysts IHS.



■ Manufacturing growth ticked up and has stayed in positive territory for two years.
■ Factories are being boosted by more domestic orders and cheaper oil .
■ Exports remain subdued with the Eurozone – which consumes nearly half of the UK’s exports – struggling for growth.


■ The recovery in the Eurozone’s manufacturing sector stalled in January.
■ Manufacturers failed to register a significant improvement in export orders despite a 10 per cent fall in the value of the euro over the past year.
■ Activity is stronger in countries that have undertaken reforms such as Ireland and Spain.
■ Expansion in Italy and France remains weak, with both countries struggling to push through reforms.

Emerging Markets

■ Manufacturers in China saw a slight improvement in February.
■ Oil prices provided a boost to China but export demand remains weak.
■ With Chinese manufacturing activity holding up well, any slowdown in economic growth is likely to be gradual, not abrupt.
■ The manufacturing outlook for Russia improved but this may be because the country’s economic crisis has stopped getting worse, as opposed to there being a recovery in process.
■ India’s factory growth lost momentum in February, falling to its slowest pace since September 2014.
■ Brazil’s manufacturing PMI dropped below 50 in February, suggesting the industry is still struggling. Domestic orders were weak, implying a worse outlook for the wider economy.
■ Indonesia’s manufacturing sector contracted at its fastest pace on record, while Vietnam and Taiwan registered improvements.

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