While CBI quarterly figures show a growth in orders, the CIPS/NTC Purchasing Managers’ Index (PMI) identifies a fall in business for January.
Despite remaining above the no-change mark of 50.0 throughout the past two and a half years, the seasonally adjusted PMI for January came dangerously close, recording a reading of 50.6 – the lowest since August 2005.
The seasonally adjusted New Orders Index recording a reading of 49.7 – the first decline in incoming new business since July 2005. Companies held a lacklustre demand, particularly in key foreign markets, responsible for the decline.
The level of new export orders contracted for the first time in almost one and a half years, with the New Export Orders Index falling to 47.6. This change reflected the effect of the softer economic conditions in a number of key markets, most noticeably in the US.
The decrease in new orders resulted in the rate of expansion of manufacturing production easing to its weakest since December 2006.
Having increased throughout 2007, UK manufacturing employment levels declined in January with the seasonally adjusted Employment Index dropping to 48.3 from 51.4 in December 2007.
Increasing purchasing costs and factory gate prices lead to intensified inflationary pressures for January. The seasonally adjusted Output Prices Index rose to 57.9 – the fastest increase since charges data was first collected in November 1999. This latest rise in factory gate prices reflected the passing of higher input costs by manufacturers on to consumers – companies reported higher costs for food stuffs, especially cereals, dairy products and meats, as well as continued high oil prices.
Reduced inventory holding within companies continued in January, leading to further depletions of both raw material and post-production stocks. The decline occurred regardless of a slight increase in purchasing activity, which was due to a number of firms meeting production requirements using existing stock.