PMI could level out by autumn

Posted on 1 Jun 2009 by The Manufacturer

The CIPS/Markit Purchasing Managers’ Index for May has backed other organisations’ surveys in suggesting the tides may be turning for the fortunes of UK manufacturers.

The PMI registered a level of 45.4 for May and, though still in negative territory (where 50 means unchanged), this represents the best result in 12 months and a third straight month of improvement. The figure for April was 43.1.

Production and new orders continued to decline in May, but at the slowest rates for twelve and fourteen months respectively. Though employment has now declined for the 14th straight month, the fall in staffing levels in May was the lowest since October’s reading.

Consumer goods producers reported an increase in production for the first time in fourteen months.

“Although the PMI remains below levels consistent with outright recovery, this is a further sign that the downturn in UK manufacturing is easing,” said Rob Dobson, senior economist at Markit.

“Indexes for output and new orders followed similar trends (and) the performance of consumer goods producers was especially heartening.”

Dobson said other noteworthy points from the survey were that large-sized companies are seemingly faring better than SMEs and that manufacturers noted a reluctance amongst their clients to spend, with capital goods orders suffering as a result.

Exports is one area still showing little signs of recovering with new orders from overseas falling at an even faster pace than registered in April. Manufacturers noted especially low demand from the US, mainland Europe and Brazil. However Roy Ayliffe, director at the Chartered Institute of Purchasing & Supply (CIPS), said this “could be that the UK is recuperating faster than its key export markets”.

Ayliffe said that if improvements continue at their current rate then a no-change 50.0 PMI benchmark will be achieved by Autumn.