UK manufacturing starts to rebound

 

After a slump earlier in the year, UK manufacturing has almost returned to growth.

As reported in The Guardian, the British economy grew by 0.3 percent in the first quarter and analysts hope that the signs of a recovery in manufacturing will result in a stronger second quarter.

The Markit/CIPS Manufacturing Purchasing Managers' Index (PMI) rose to 49.8 in April. This compares to the March figure of 48.6 (which was upwardly revised). A PMI of above 50 reflects growth in the sector.

Economists were expecting a much weaker figure of 48.5.

Lee Hopley, chief economist at EEF, the manufacturers' trade body, saw the figure as reason for some confidence.

"While still not in positive territory overall, the data indicates a vital revival in export orders with demand from markets in the Americas and Middle East compensating for the continued weakness in Europe. This is an especially positive as the UK sorely needs an improvement in trade if we are to make faster progress on rebalancing growth."

While the MPI figure was encouraging, there were job losses in the manufacturing sector. This has now been the case for three consecutive months.

Rob Dobson, an economist at Markit, said: "Following the poor start to the year, when manufacturing acted as a drag on the economy in the opening quarter, it is welcome to see the sector showing signs of stabilising in April. With forward-looking indicators such as new orders and the demand-to-inventory ratio also ticking higher, the sector should at least be less of a drag on broader GDP growth in the second quarter.”

 Reuters pointed out that this result for manufacturing points to a broader economic recovery, albeit a slow one.

Chancellor George Osborne said that the manufacturing sector will probably continue to weigh on GDP growth for a couple of quarters.