Manufacturers are ramping up production to meet demand at home and abroad after enjoying one of their strongest growth spurts for two decades, industry watchers declared.
The Chartered Institute of Purchasing & Supply’s latest snapshot of the sector in May showed manufacturers stepping up production to meet rising numbers of orders.
The revival fuels hopes of a long-awaited rebalancing of the economy towards manufacturing and trade. Rob Dobson, senior economist at financial data firm Markit, said the “sector basked in one of its brightest growth spells of the past two decades”.
Although Cips’ benchmark of overall activity in the sector, where a score over 50 indicates growth, eased slightly from 57.3 to 57, the pace of the manufacturing revival remains close to historic highs. Cips chief executive David Noble said: “We’re starting to see real evidence of a sustained recovery for the sector.”
The relative health of the UK’s industrial base contrasts with conditions in the eurozone, where growth slowed in all countries except the Netherlands.
The European Central Bank is expected to cut its main interest rate this week as well as introducing a negative deposit rate for banks, effectively charging them to keep reserves at the central bank, in order to boost credit.
The Bank of England wants to keep interest rates low for as long as possible while using targeted tools to cool off risks such as the housing market. Figures showing a sharp decline in mortgage approvals in April today offered ballast to that strategy.
The Cips survey showed manufacturers enjoying a broad-based recovery in international orders from the US, Asia, Canada, Europe, the Middle East and New Zealand, spanning consumer goods, plant and machinery. Firms across the sector also took on more staff for the 13th month in a row.
Neil Prothero, deputy chief economist at the EEF manufacturers’ organisation said: “The sector is firmly on track to expand for a fifth consecutive quarter, its strongest performance in four years. Signs of a pick-up in export orders are especially welcome, as the broader rebalancing story still requires a significant boost in net trade to support the recent rebound in business investment.”
BNP Paribas economist David Tinsley said the survey kept the economy on course for a faster overall growth rate in the current quarter than in the first.