Manufacturing growth and costs rise
Monday 02 April 2012
Better than expected growth in the manufacturing sector in March was today overshadowed by one of the steepest rises in input prices for 20 years.
The Markit/CIPS survey, where a reading above 50 represents growth, hit a 10-month high of 52.1, which was higher than February's score and exceeded City expectations of 50.8, although the growth was partly driven by companies building up levels of inventories at record rates.
While the survey indicates that the sector returned to growth in the first quarter of 2012, it also showed that average prices rose at their fastest rate since last August in "a marked turnaround" from the sharp declines just two months ago.
The extent of the pick-up in costs since the start of 2012, driven by rising oil and metal prices, is among the steepest in the survey's 20-year history and is already starting to pass its way through to customers, with selling prices up at their fastest pace for half a year.
Rob Dobson, senior economist at Markit, said: "A major cause of concern among manufacturers is the recent upsurge in input prices, which mainly reflects high oil prices."
He added that strong competition meant firms were struggling to pass on the full extent of the cost hikes but warned "margins can only be squeezed so much until producers need to raise prices".
The stronger than expected performance - the fourth month of growth in a row - will help ease fears the UK economy is slipping back into recession after a bigger than previously thought 0.3% decline in gross domestic product - a broad measure of output - in the final quarter of 2011.
Economists at Markit think that the sector has grown by about 0.3% in the first quarter of 2012.
Domestic demand increased in March and companies saw growth in Africa, Asia and Japan, which helped offset weakness caused by the eurozone debt crisis.
Despite the growth in new orders, the survey said conditions in the sector remained "tough overall".
The sector's growth was partly driven by manufacturers "burning through backlogs of orders" and building up stockpiles of finished products at record levels, particularly for consumer goods products.
CIPS chief executive David Noble said the rise in inventories could signify that demand is expected to pick up in the coming months.
But Samuel Tombs, an analyst at Capital Economics, said: "Given that a pick-up in price pressures appeared to contribute to the manufacturing slowdown in the second half of last year, it seems as if the industrial recovery is still built on shaky foundations."
- 1 Cyclist who knocked down three-year-old girl says his life has been 'destroyed'
- 2 Chelsea victory parade: Chelsea mocked on Twitter as 'tens of fans' pack the streets of London
- 3 US warned by Chinese media to stop meddling or 'war will be inevitable'
- 4 Woman, 21, dies after taking contraceptive pill that 'caused fatal blood clot'
- 5 Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
Cyclist who knocked down three-year-old girl says his life has been 'destroyed'
US warned by Chinese media to stop meddling or 'war will be inevitable'
How China's richest man Li Hejun lost $15bn in an hour - and made a fortune
Isis burns woman alive for refusing to engage in 'extreme' sex act, UN says
Snoop Dogg on why he doesn't regret displaying misogyny towards women
As a white man, I'm surprised more women aren't tweeting the hashtag #KillAllWhiteMen
Scotland may have to leave the EU even if it votes to stay in, David Cameron confirms
The day that Britain resigned as a global power
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
A nation of inequality: How the UK is failing to feed its most vulnerable people
iJobs Money & Business
£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...
£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...
£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...
£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...