Factories rally in August after dismal start to summer

Posted on 4 Sep 2012

Manufacturers expressed better output and confidence in orders in August following a dismal three-month run that have given hope to a more sustained recovery.

The Markit/CIPS purchasing managers index, PMI, a benchmark metric for manufacturing health in the UK, scored 49.5 in August. Anything below 50 represents a contraction in growth and orders, but the index was 45.2 in July, showing that output rallied by a significant 4.3 points.

Markit economists’ forecast for August was a PMI of 46.1. The figure, kissing the crucial 50 breakeven value that signifies growth, is the sector’s best performance since April. “The rebound … appears to represent something of a normalisation,” Ross Walker, UK economist at Royal Bank of Scotland, told The Daily Telegraph.

Manufacturers’ organisation EEF and accountants BDO said on Monday that their business survey recorded the worst performance in the preceding quarter since the 2009 recession. Firms responding to their survey said factory output and order balances were at their lowers level since Q4 2009 and Q1 2010, respectively.

EEF’s chief economist Lee Hopley said: “It was a better than expected upturn for manufacturing activity in August, but the sub-50 reading still signals contraction. However, with signs that some recruitment is still taking place amongst SMEs there is hope that companies have a bit more confidence about their medium term prospects.
“But together with another round of awful data from Europe, the outlook for export-focused manufacturers, and hopes of an export-led economic recovery, continue to look challenging.”
Depending on the sector they operate in, and the markets they’re selling to, some manufacturers have not experience a lacklustre summer. Business for Rical Group, for example, is brisk.