UK manufacturing production expanded for first time in fifteen months in June. At 47.0, up from 45.4 in May, the seasonally adjusted CIPS/Markit Purchasing Managers’ Index (PMI) - - a composite index based on data for new orders, production, employment, suppliers’ delivery times and stocks of purchases - - posted its highest reading since May 2008. However, the headline PMI has now posted below the neutral 50.0 mark for fifteen months running.
The performance of the sector in Q2 2009 was a noticeable improvement on that signalled for the opening quarter of the year. Average index readings for the headline PMI and those tracking trends in output, new orders, new export orders, employment, stocks of purchases, purchasing activity and backlogs of work were all noticeably higher in Q2 than in Q1.
Manufacturing production rose for the first time since March 2008 in June. The upturn was broad-based by sector - -with gains recorded across the capital, consumer and intermediate goods categories -- and according to company size. New orders and stocks of finished products fell again in June, indicating that the expansion of output was mainly focused towards reducing backlogs of work. However, rates of decline in new work received and post-production inventories eased during the latest survey period.
The drop in total new orders was only modest and the weakest during the current fifteen-month period of decline. Companies reported that conditions in both domestic and export markets remained weak overall. However, others noted that successful promotional activities, new product launches and Manufacturing employment declined for the fifteenth successive month in June. The rate of reduction in staffing levels remained substantial, but eased further from February’s record to its weakest since last August. Job losses mainly reflected redundancies, restructuring programmes and cost control initiatives.
David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said:“The latest PMI data suggests that after months of gloom and doom, there are some signs of relief for the UK manufacturing sector. Most encouragingly, purchasing managers said that output, which is a key component of the PMI index, has risen for the first time in fifteen months indicating that the sector may finally be coming out of recession.
“One of the reasons for this improvement may be that firms are adapting to market changes. Many are expanding their promotional activities and becoming more willing to discount goods in order to secure even the slightest hint of demand.
“However, that such data can be read so positively really highlights how bad things have been over the past fifteen months. Employment levels are still falling which demonstrates that we still have a long way to go before the sector returns to full health.”
