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UK manufacturing shows signs of recovery – but firms remain cautious | UK manufacturing shows signs of recovery – but firms remain cautious |
(about 2 hours later) | |
A rebound in manufacturing appears to be under way after a disastrous start to the year, according to a survey of the sector in April. | A rebound in manufacturing appears to be under way after a disastrous start to the year, according to a survey of the sector in April. |
Strong sales of consumer goods to North America, the Middle East, Latin America and Australia helped the sector stabilise after a slump in January and February. | Strong sales of consumer goods to North America, the Middle East, Latin America and Australia helped the sector stabilise after a slump in January and February. |
Ministers will cheer a recovery in the sector, especially after the 0.3% rise in GDP in the first three months of the year, which was largely attributed to the strength of the services industry. | |
An improved outlook for manufacturing, which was a drag on output in the first quarter, could allow GDP to maintain a more consistent and positive path over the coming months. | An improved outlook for manufacturing, which was a drag on output in the first quarter, could allow GDP to maintain a more consistent and positive path over the coming months. |
The consumer goods industry led the way, with companies producing machine tools not far behind, as the sector showed a modest rise in production amid a widespread clearance of stock left over from the slump earlier in the year. | The consumer goods industry led the way, with companies producing machine tools not far behind, as the sector showed a modest rise in production amid a widespread clearance of stock left over from the slump earlier in the year. |
Much of the slump is attributed to bad weather at the beginning of the year, though renewed uncertainty in the eurozone and a persistent lack of bank lending for investment also played a part. | Much of the slump is attributed to bad weather at the beginning of the year, though renewed uncertainty in the eurozone and a persistent lack of bank lending for investment also played a part. |
Althouth eurozone fears have eased, the situation remains febrile and persistenly tight bank lendingis making some analysts cautious about a possible upturn. | |
The Cips/Markit survey showed the sector continued to shrink last month but by only a small margin. At 49.8, the manufacturing purchasing manager's index (PMI) continued to be below the 50 figure that divides growth from contraction, though it fed expectations of a return to growth in May. | The Cips/Markit survey showed the sector continued to shrink last month but by only a small margin. At 49.8, the manufacturing purchasing manager's index (PMI) continued to be below the 50 figure that divides growth from contraction, though it fed expectations of a return to growth in May. |
Lee Hopley, chief economist at EEF, the manufacturers' trade body, said the survey was a mildly encouraging start to the second quarter. | Lee Hopley, chief economist at EEF, the manufacturers' trade body, said the survey was a mildly encouraging start to the second quarter. |
"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 a especially positive as the UK sorely needs an improvement in trade if we are to make faster progress on rebalancing growth." | "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 a especially positive as the UK sorely needs an improvement in trade if we are to make faster progress on rebalancing growth." |
Markit said the eurozone continued to drag on export sales, but a shift to markets further afield was making up some of the difference. | Markit said the eurozone continued to drag on export sales, but a shift to markets further afield was making up some of the difference. |
In contrast to the improving output figures, the sector shed jobs for the third straight month and most firms said they remained cautious about a possible sustained recovery. | |
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. | 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. |
"Manufacturers report that the domestic market is just about holding its head above water, but was still a key cause of disappointingly weak demand, while a solid improvement in new export orders was the real surprise." | "Manufacturers report that the domestic market is just about holding its head above water, but was still a key cause of disappointingly weak demand, while a solid improvement in new export orders was the real surprise." |
The figures followed a disappointing survey of Chinese manufacturing that showed a dip earlier this year turning into a more prolonged slowdown. | |
The official manufacturing PMI, composed for the statistics bureau by the China Federation of Logistics and Purchasing, fell from 50.9 in March to 50.6 last month. | The official manufacturing PMI, composed for the statistics bureau by the China Federation of Logistics and Purchasing, fell from 50.9 in March to 50.6 last month. |
A Capital Economics analyst, Mark Williams, said: "At face value that is not too big a drop. But April is normally one of the strongest months of the year, particularly for output. The fact that the output component fell at all – from March's 52.7 to 52.6 – is therefore a concern," he said. "If the usual pattern holds, output will weaken in coming months." |