The manufacturing sector built on its strong end to last year with a good start to 2010, data out today suggest.
Data for January from the Chartered Institute of Purchasing and Supply (Cips) saw its purchasing managers’ index (PMI) – a barometer of new orders, production, employment and supplier performance in the engineering industry – rise to a high of 56.7.
The headline PMI figure was at its highest level since October 1994, the institute said. Relatively weak PMI figures in November had raised concerns that an upswing in manufacturers’ fortunes could be short-lived, but today’s figures suggest the recovery is strengthening.
Commenting on today's PMI numbers, chief economist at manufacturers’ organisation the EEF, Lee Hopley, said: “Manufacturing continues to gain further momentum as a weaker sterling finally helps companies take advantage of growth in overseas markets.
“An export-driven recovery looks likely to take centre stage as the main driver for growth across the economy, although rising costs mean that manufacturers will have one eye on inflation and continued cost control.”
The employment element of the PMI index was especially significant last month, with manufacturers reporting a rise for the first time in almost two years. Some sectors, however, continue to make redundancies, particularly in basic metals and “mechanical engineering sub-industries”.
David Noble, chief executive of CIPS, said: “One of the most encouraging aspects of this month’s PMI is the turnaround on the jobs front. For the first time in 21 months there has been an increase in employment, albeit only a slight one.”
He said employment was usually a lagging indicator in recession, so improved data suggested firms more confident about the future.
Noble added that the PMI was “very positive news and a great way to start the year”. “Although the manufacturing sector represents a smaller proportion of total UK GDP than ten or 20 years ago, it is still a very important part of the economy.
“It is therefore encouraging to see such strong growth and it suggests we are coming out of recession much quicker than previously feared.”
© PE Publishing, 01 February 2010
