According to a report to be published in April by the Chartered Institute of Procurement & Supply, the growth rate of the UK manufacturing sector continues to strengthen at the start of 2015, leading to further job creation.
The report says that companies have benefited from sgrowth of new business from the domestic market, which offset lower export volumes. Price pressures remained on the downside, however, with both average input costs and selling prices falling during the latest survey month.
The seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) rose to a seven-month high of 54.1 in February, up from 53.1 in January. By posting above 50.0, the PMI extended its run above the critical mark that separates expansion from contraction to two years.
February saw the rate of expansion in manufacturing production accelerate for the third month running to its highest since June 2014. Growth was led by the consumer goods industry, although solid expansions in output were also registered at intermediate and investment goods producers.
Manufacturers reported a further improvement in new order inflows during February, underpinned by rising volumes of new business from domestic based clients. In contrast, export performance deteriorated for the fourth time in the past five months, reflecting subdued conditions in key markets and the sterling exchange rate.
February data signalled an increase in UK manufacturing employment for the twenty-second successive month. Moreover, the rate of jobs growth accelerated to a three-month high and was broadly in line with the average for the current sequence of expansion. Companies reported that the ongoing upturn in the sector had encouraged further job creation, with workforce numbers rising at SMEs and large-sized firms alike.
The sharp decrease in oil prices earlier in the year continued to filter through to manufacturers’ input costs during February. Average purchase prices fell at a substantial pace that was only slightly less marked than January’s 68-month record. There was mention of lower costs for chemicals, energy, food raw materials, oil, oil by-products, plastics and timber. The sterling exchange rate was also reported to have reduced the cost of a number of imported goods.
Average output charges were reduced again in February, the second successive survey period where a decrease has been signalled.As well as lower input prices, the reduction in output charges reflected rising competitive pressures.
Commenting on the report, David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said: “The rising levels of job creation, now in their twenty-second month, demonstrate that the sector is in buoyant mood this month. This is good news for the UK economy as higher staffing levels mean more opportunity for economic expansion. The consumer goods sector was the star of the show, where there were significant increases in activity and stocks of raw materials continued to rise.
“With faster growth in new orders than at the beginning of the year, this increased momentum is once again attributed to the domestic market, as export orders lag behind. Though there was some growth in the Eurozone and elsewhere, this did not translate strongly enough to support increased new export orders.
“The performance of vendors deteriorated marginally as purchasing activity increased. Backlogs were reduced in response to this new landscape of recovery, and with higher levels reported on finished goods, the sector looks set to continue along a positive trajectory in the months ahead.”
The March 2015 Report on Manufacturing will be published on: Wednesday, 1st April 2015.
