Output slows but factory orders rise

Click to follow
The Independent Online

Output growth at British factories slowed last month but manufacturers' order books grew at their fastest rate in five months while their pricing power increased, sustaining hopes of a recovery in the sector.

Output growth at British factories slowed last month but manufacturers' order books grew at their fastest rate in five months while their pricing power increased, sustaining hopes of a recovery in the sector.

Manufacturing activity slowed in December after a four-month high in November, according to the Chartered Institute of Purchasing and Supply (Cips). Its index for December fell to 53.7 from 55.0. The decline was caused by falls in output growth, employment and inventories, with about 13 per cent of manufacturers polled cutting jobs. Faced with high oil and steel prices, businesses cut back temporary staff and did not replace leaving workers. High input prices also forced manufacturers to put up their prices again, at the fastest rate for at least five years.

But economists cautioned against reading too much into the fall in manufacturing activity. In a sign that factory production will hold up in the months ahead, new orders rose at their fastest pace since July. Companies reported solid growth in export orders, the fourth consecutive monthly rise, and said Europe and the Far East were the main export destinations.

John Butler at HSBC said: "The index is still consistent with an industrial recovery that has yet to materialise. Overall, despite the disappointing drop on the month, the survey is still better than the official data and in line with the average over the past year."

Over the past few months, the upbeat Cips surveys have been at odds with the gloomier official data, which showed a fall of 0.8 per cent in manufacturing production over the third quarter. Some economists said yesterday's survey supports the case for interest rate cuts when taken with weak housing market data, also out yesterday.

Comments