Manufacturing growth accelerates

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Manufacturing News, Source : TheManufacturer.com
Published : 01 Mar 2007 10:31
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Production and new orders at UK manufacturing companies picked up pace in February, while employment rose at its fastest pace since March 2005.

The CIPS/RBS Purchasing Managers Index (PMI) posted its highest reading for over two and a half years at 55.4 in February. The PMI has remained above the neutral 50.0 mark for nineteen successive months and data from UK manufacturers confirms that the sector started 2007 on a progressively positive note.

There were also signs that robust operating conditions were driving a recovery in firms’ pricing power, as average factory gate prices rose at the fastest rate since charges data were first collected in November 1999.

The rise in prices will make for interesting reading for the Bank of England, which has already raised interest rates by 75 basis points since last August to dampen inflation.

Rising for the third successive month, from a low of 47.6 in November 2006, the seasonally adjusted Employment Index posted a reading of 52.1 in February, to signal the sharpest increase in staffing levels since March 2005. Companies reported that additional employees had been recruited in response to growth of production and new orders. The development and launch of new product lines also contributed to higher employment levels.

The robust growth of new orders, alongside an increase in worker productivity and plant efficiency, led to a further marked expansion in output. A rise in production has now been recorded in each of the past twenty months, with the latest expansion being the strongest since last September.

Input cost inflation remained marked in February, as companies reported higher prices for certain raw materials, including chemicals, metals and timber. However, the rate of increase in purchasing costs was less sharp than the highs seen during mid-2006.

Commenting on the report, Roy Ayliffe, director of professional practice at CIPS, said: "The manufacturing sector is currently pretty buoyant with purchasing managers reporting strong levels of new orders, worker productivity and plant efficiency. This has allowed companies to have the confidence to increase factory gate prices at their fastest rate since November 1999 and to increase staffing levels at the sharpest rate in almost two years.

“The rising costs of raw materials continue to have an impact, although purchasing managers report that the rate of input cost inflation has lowered from its peak in mid-2006.”