EEF paints brighter picture of manufacturing

Posted on 2 Jun 2008 by The Manufacturer

While the CIPS/NTC Purchasing Managers’ Index reported a halt in output production, EEF gained more positive results from its Engineering Outlook Report, sponsored by Grant Thornton.

This survey identified a tenth consecutive quarter of growth, with evidence of an increase in domestic orders, which rose from +2 per cent to +4 per cent, and an output balance of +16 per cent.

Export orders remained strong at +10 per cent but had softened slightly compared to previous quarters, possibly due to economic conditions in the United States.

Costs have, however, continued to rise, and it seems firms are having trouble passing on some of these price increases. As a result, the domestic margins balance dropping from -9 per cent to -18 per cent and from -8 per cent to -14 per cent on export margins. This has added to inflation concerns.

“Companies are responding to the squeeze on their margins from rising costs by continuing to invest in their businesses to drive up productivity,” commented EEF chief economist Steve Radley.

Indeed, investment intentions remained firm, with the balance easing only slightly to +14 per cent.

“These figures show most manufacturers have made hay while the sun was shining, and are proving much more resilient to the credit crunch than many analysts had predicted,” said Grant Thornton head of manufacturing Bob Hale. “The pain of raw material price inflation and tighter refinancing is balanced by the gain of a weaker pound for exporters and the growing demand for the quality output that UK manufacturers have gained a reputation for producing.”

EEF has now issued revised predictions for the remainder of 2008 – manufacturing is now forecast to grow by 0.9 per cent and engineering by 1.3 per cent.

“Manufacturers are providing a beacon of light amidst the current economic gloom and remain cautiously optimistic about their immediate prospects,” said Radley. “However, at a time of heightened uncertainty, the government needs to send a clear message that it will ensure that the UK remains an attractive place to do business.”