UK manufacturing sustains growth through Q4 2015

Posted on 1 Dec 2015 by Jonny Williamson

The UK’s industrial sector has maintained its positive start to the final quarter of the year, with November seeing growth ease only moderately from October’s peak.

The November Markit/CIPS UK manufacturing Purchasing Managers’ Index (PMI) recorded 52.7 for November – with any figure over 50 indicating growth.

Markit-CIPS Manufacturing PMI - Historical Overview
Markit/CIPS Manufacturing PMI – Historical Overview

However, the expansion remained predominantly centred on large companies, as SMEs remained lacklustre in comparison.

The score of 52.7 is down from October’s 16-month high of 55.2 (revised down from 55.5), yet the PMI has remained above the neutral 50.0 mark every month since 2013.

According to the figures, manufacturing production expanded for the 32nd consecutive month in November, bolstered by rising levels of new business.

Although the rates of growth indicated were weaker than that of the previous month, they remained above the respective long-run series averages.

November saw little change in staffing levels, and the trend in new export business at UK manufacturers continued to improve.

Lee Hopley, chief economist, EEF.
Lee Hopley, chief economist, EEF.

Commenting on today’s PMI data, chief economist at EEF, Lee Hopley: “The massive bounce in the figure last month wasn’t quite a blip, but the pace of activity appears to have moderated in November.

“While ongoing expansion in the sector signalled by todays figure is to be welcomed, the positive trend isn’t broad based across industry and isn’t supporting sufficient confidence to prompt a return of employment growth.

“This lines up with what we’re hearing from manufacturers, with flagging world trade growth and the low oil price dragging on some sectors being partly compensated with brighter demand prospects from consumers.”

EEF is due to publish its Q4 manufacturing outlook survey and revised economic forecasts next Monday, 7 December.

Mark Stephenson, Deloitte
Mark Stephenson, UK manufacturing industry leader, Deloitte.

UK manufacturing industry leader at Deloitte, Mark Stephenson noted: “While the PMI has dropped slightly to 52.7, it still remains above 50 showing how hardy the UK manufacturing industry was in November’s tough conditions.

“Recent UK GDP data shows that the value of industrial output has grown slightly in the quarter to September. Yet exports are growing only marginally and our trade gap is widening. The continued strength of the Pound relative to the euro is not helping to ease this pressure on margins in the UK’s largest export market.

“News of further economic uncertainty in China continues to drag, both in terms of demand for UK manufactured goods and uncertainty over supply from the country. On the other hand, more positive economic growth data than expected in Japan and the US bodes well for developed manufacturing sector economies.

“Despite the apparent challenges, the industry continues to perform. For this to continue, remaining competitive will be key through sustained cost reduction, continuing to innovate, and recruiting, retaining and motivating a skilled workforce.”