Latest data shows an increase in manufacturing production

Posted on 9 Jan 2015 by Jonny Williamson

Total production output increased 1.1% in November 2014 compared with November 2013, with manufacturing (the largest component of production) the only one to rise, increasing by 2.7%.

The Index of Production (IoP) figures, released today by the Office for National Statistics (ONS) show increases in seven of the 13 manufacturing subsectors compared with a year ago, with the largest contributor being the manufacture of food products, beverages and tobacco – the same as it was in October 2014.

Explaining the subsectors growth, ONS noted that the majority of food products, beverages and tobacco’s turnover is generated from smaller and more regular contracts; consequently quarterly growth in “seasonally adjusted output has a lower volatility compared to other manufacturing sub-industries.”

ONS added that the export proportion of food products is also relatively low, ranging between 3.4% and 12.6% in 2013 across different types of food and drink.

Though total production decreased by 0.1% between October 2014 and November 2014, manufacturing output increased by 0.7%. The main contributors to the increase, according to ONS, were other manufacturing & repair; the manufacture of basic metals & metal products; and the manufacture of transport equipment.

Compared to the pre-downturn peak in Q1 2008, the three months to November 2014 saw production and manufacturing 10.3% and 5.3% respectively below the previous figures.

Chief economist at EEF, Lee Hopley commented: “Although confidence among manufacturers for the year ahead has waned a little, the latest trade and production data show that there was some momentum in the sector towards the end of 2014, with virtually all sectors posting some growth in November.

“While the UK’s overall trade picture showed a small decline, manufactured exports have recorded three consecutive months of growth, a factor which will have helped push up production levels. However, with the global outlook becoming more uncertain, a continuation of this trend is far from assured.

Head of manufacturing at Barclays, Mike Rigby said: “The slowdown in the pace of growth towards the end of 2014 put a bit of a dampener on what had initially looked like a promising year of recovery.

“Although the UK’s benign economic conditions are broadly supportive for manufacturers, they do have a double edge in that currently they don’t offer much incentive to manufacturers to invest in vital new product development, machinery and new markets which are crucial to boost further growth. The sector will be looking to 2015 to give them a clearer economic and political picture.”

David Kern, Chief economist at the British Chambers of Commerce noted:  “The latest trade and manufacturing figures were better than most analysts expected and support the more positive assessment of the UK economy conveyed in [our] Quarterly Economic Survey published yesterday.

“The improvement in the trade deficit for the second month in a row is particularly welcome. Although the narrowing of the November deficit was mainly due to a fall in imports, the more representative three monthly figures show that exports on goods increased while imports declined. And the rise in manufacturing confirms that the sector is making gradual progress and continues to expand in a difficult global environment.

“In spite of these positive figures there is no room for complacency. The UK faces a national challenge when it comes to trading the world. The MPC must persevere with low interest rates for most of this year and we need to redouble our efforts to place exports at the heart of businesses’ growth strategy if we are to achieve the governments export target and rebalance the economy.”