Manufacturing grows again but can’t match runaway August

Posted on 1 Oct 2013

Manufacturing sector growth slowed a little in September from a two-year high in August, due to fewer export orders, but in the quarter it recorded the highest growth for 30-months.

The Markit/CIPS Purchasing Managers’ Index fell to 56.7 from August’s two and a half year high of 57.1, a lower index than economists in a Reuters poll had predicted.

Manufacturing commentators were united in saying the stellar performances of July and August were unlikely to be repeated in a third straight month, given the gentle recovery.

However, for the quarter it was the highest growth recorded in two-and-a-half years and employment and prices rose at their fastest pace in two years, suggesting there is limited spare labour capacity in manufacturing.

The Bank of England is forecasting several years of relatively low-inflation growth for the economy as a whole, giving the sector another boost, although Chancellor George Osborne’s speech at the Conservative Party conference yesterday said “austerity will remain, while the economy can move into a budget surplus [under the Coalition government].”

Carl Williamson, manufacturing sector lead at Lloyds Bank Commercial Banking, said: “After reaching a two and a half year high in August, it was perhaps inevitable that the manufacturing sector would pause to catch its breath. Despite the slight fall in the PMI the country’s factories remain in good health.

He added “To capitalise on future growth opportunities, manufacturers must continue to invest in enhancing their capacity, products and processes, while addressing concerns around cost inflation.”

Manufacturers’ organisation EEF struck a characteristically cautious note. “The good run of indicators should continue beyond the end of this year with some expansion in manufacturing taking place in Europe, Asia and the US,” said economist Lee Hopley.

But she added “If there are reasons for caution, the challenge of the whole supply chain ramping up production to meet growing demand given the persistent weakness in investment is one. A second concern is inevitably around any certainty that the positive outlook globally will be sustained.”