Recession in UK manufacturing is easing, says report

Sep 3, 2012

Manufacturing sector continues to contract - but August data is best for four months

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THE RECESSION in UK manufacturing is easing, according to unexpectedly good data. The Purchasing Managers' Index increased to 49.5 in August from 45.2 in July, according to Markit/ CIPS. Since it remains below 50, the figure, which is based on the number of orders placed, indicates the manufacturing sector is still contracting.

However, The Times reports, it is still much better than analysts expected and marks a four-month high in purchasing activity.

Markit's Rob Dobson was cautiously optimistic, saying: "The marked easing in the rate of contraction at UK manufacturers is heartening."

But, he added, "overall demand remains too lacklustre to provide an imminent and sustained recovery, with investment spending still weak and domestic austerity ongoing".

A separate survey by manufacturers' lobby EEF shows that the past three months have been the toughest since early 2010 for manufacturers and predicts that the sector will contract by 1.5 per cent in 2012. However, the BBC reports, the EEF says the manufacturing sector will expand by 1.5 per cent in 2013.

On a more positive note, both the EEF survey and the PMI survey showed that manufacturers are taking on new staff despite falling profits.

Tom Lawton of business advisers BDO, which helped compile the EEF survey, said: "This indicates that manufacturers have learnt the mistakes of the past and are preparing themselves for an upturn in the market, whenever and wherever this may occur."

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