Downturn in manufacturing eases as new figures show four-month high

 

The downturn in UK manufacturing showed signs of easing today after new figures revealed a rebound from July's “disastrous” performance.

The latest Markit/CIPS purchasing managers' index (PMI) produced a headline reading of 49.5 for August, representing a four-month high and only slightly below the 50 mark that separates expansion from contraction.

The survey contrasts with the findings of the EEF manufacturing organisation, which today said firms were facing the toughest conditions in nearly three years as the sector struggles against headwinds from the eurozone.

CIPS chief executive David Noble said a repeat of the previous month's performance would have been unthinkable: "We can take consolation from August's figures in that they were less bad than the disastrous month before. We have witnessed a return to the status quo of flat growth in a fragile economy."

With the figure better than City expectations and other eurozone countries, ING economist James Knightley said one-off factors such as the Olympics and the delayed effects of the Diamond Jubilee may have influenced the result.

He added: "The report is consistent with stagnation in the UK's manufacturing sector rather than the deepening recession hinted at by official data."

The figure of 45.2 for July, which followed readings of 48.6 and 45.9 in June and May respectively, was blamed on a "perfect storm" of wet weather, weak confidence and the continuing eurozone crisis.

In August, manufacturers were able to raise their average selling prices in a bid to recover some of the margins lost earlier in the year.

However, the rate of inflation was only modest as strong competition and weak demand restricted the pricing power of a number of firms.

Input costs also declined for the third month running during August, reflecting lower metal and plastic prices.

Labour enterprise spokesman Iain Wright said: "Today's report from the EEF is a worrying indication of the impact of the recession on British manufacturing. George Osborne's promise of a 'march of the makers' rings hollow.

"By cutting spending and raising taxes too far and too fast, the Tory-led Government has undermined the potential of UK manufacturers to lead the economy into recovery.

"We need a long-term industrial strategy which helps British manufacturing achieve its potential as the most creative and innovative sectors anywhere in the world."

PA

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