Stagnant eurozone gives UK manufacturing the wobbles

Posted on 21 Nov 2014 by The Manufacturer

Optimism in manufacturing growth is the lowest in over a year, as exports to the EU and emerging markets slow down, but there some positive signs elsewhere.

The manufacturing sector in the UK is still growing the report says, but it has lost momentum due to weak export orders from the eurozone and slowing growth in emerging markets, the CBI said today.

Of the firms surveyed, 17% said their export order books were above normal levels, while 34% said they were below. That gave a balance of -17%, an improvement on October’s -23% but continuing the run of negative results.

Fifteen of the 18 manufacturing sectors reported below-average export orders, with the biggest drop coming from mechanical engineering, where export orders were at a two-year low.

The business group’s industrial trends survey also found that expectations for growth over the next three months fell to their lowest level for 13 months, despite a rise in orders.

IHS chief UK economist, Howard Archer said that the recent strength of the pound had not helped UK manufacturers, though added that there were still grounds for optimism among manufacturers.

“This is a mixed bag of a survey, but it is encouraging that orders picked up markedly in November after recently falling back,” he said.

Earlier today, another report showed that business activity in the eurozone fell to a 16-month low of 51.4 in November,down from 52.1 in October. This level of growth was lower than any forecaster expected. A mark above 50 indicates growth.

“November’s fall in the eurozone composite PMI is a serious blow to hopes that the recovery would resume towards the end of the year,” said Jennifer McKeown, senior European economist at Capital Economics. Further reports today also showed that China’s economy and output had slowed too.

A separate report from the Office for National Statistics showed some positive news however; spending on R&D by UK businesses was £18.4bn in 2013, 8% higher than 2012. More than half of the amount, 54%, was spent by foreign-owned businesses in the UK.

The number of people employed in R&D by UK businesses increased by 11% to 178,000, which was the largest annual increase since 1985. EEF said business spending on R&D had now returned to pre-crisis levels.