Manufacturers ready to shake off recession despite slowing growth

Industry slips in November, but analysts still expect growth

Manufacturers are poised to pull out of recession despite slowing growth in November, industry watchers said.

The Chartered Institute of Procurement and Supply’s latest snapshot, where a score over 50 signals growth, showed a bigger-than-feared slowdown from 55.2 to 52.7 in November. The survey sent sterling down as low as $1.5070, as many traders pushed back their bets on the timing of the next rise in interest rates.

Yet experts said the sector was likely to return to growth in the current quarter, despite official figures that showed manufacturing output has been in reverse since the turn of the year.

Rob Dobson, senior economist at the survey compiler Markit, said: “UK manufacturing is moving back into expansion mode during quarter four, as it starts to reverse the losses sustained in the prior quarter. Although the pace of growth so far is only very modest, it positions manufacturing as less of a drag on the broader economy.”

Input costs and factory gate prices are falling due to low oil and commodity prices, putting less pressure on the Bank of England to raise rates, he added.

Lee Hopley of the EEF, the manufacturers’ organisation, said: “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... 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.”

Figures from the US showed its manufacturing sector contracting in November for the first time in three years, as the strong dollar and energy sector spending cuts bit hard.

The figures added to the dilemma being faced by the Federal Reserve over whether to increase interest rates. Other signals show the economy heating up healthily. At the same time as the surprisingly weak manufacturing figures, other data showed a strong rise in construction spending in October.

Americans have been spending more on building work every month this year with no let-up in sight.