Q2 recovery expected as manufacturing grows

Posted on 3 Jun 2013 by The Manufacturer

The May Purchasing Managers’ Index data, released today, indicates manufacturing growth will support economic recovery in Q2.

The UK manufacturing sector grew at its fastest rate in two years in May according to data from the Markit/CIPs Purchasing Managers’ Index (PMI). The index rose to 51.3 in May from 50.2 in April. A figure of above 50 indicates growth.

Two consecutive months of positive PMI performance for UK manufacturing follow on a poor 2012 and contraction during the first three months of 2013 when factory output fell by 0.3%.

Commenting on the significance of today’s release by Markit/CIPs Lee Hopley, chief economist at manufacturing organisation EEF said: “May’s rebound in manufacturing activity signals the strong likelihood of a positive second quarter for the sector.  Broad based improvements across industry supported by rising order inflows, even from parts of Europe where the pace of contraction is now starting to ease, provide some reasons for cautious optimism that manufacturing growth is turning a corner.”

Leaders in the financial service industry echoed this positive outlook. Carl Williamson, manufacturing sector lead at Lloyds Bank Commercial Banking observed: “Manufacturers have mirrored the renewed confidence seen in the general economy, which has been driven by lower price inflation, rising equity markets and firmer economic activity, domestically and abroad.”

Mr Williamson encouraged manufacturers to take advantage of a period of more stable working conditions to push forward with capital investment and growth plans rather than “treading water by focusing solely on maintaining working capital”.

Mike Rigby, Head of Manufacturing, Barclays agreed saying: “Hopefully this will encourage UK manufacturers to look more positively at investment decisions as we move into the second half of the year. With latest industry forecasts predicting British growth to hit 1.5% next year, momentum should hold although strong headwinds will persist.”

The PMI results show that May’s strong order relied mainly on the domestic market although exports showed some improvement too.