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UK manufacturing hit a 25-month high in June

01 July, 2013

UK manufacturing had its strongest month for more than two years in June, as recorded by the monthly Purchasing Manager’s Index (PMI) which gauges the state of manufacturing.

Production levels grew at their fastest since April 2011, while new business was at its highest level since February 2011. The rate of improvement in the PMI was at its steepest for 25 months and the average for the first quarter was the highest since the second quarter of 2011.

The expansion was broad-based with the strongest rates of growth being recorded in the food & drink, and textiles & clothing sectors. New orders rose for the fourth month, with demand strengthening both domestically and from abroad.

However, employment in the manufacturing sector hardly changed during June.

“Momentum is building in manufacturing as the sector begins to work up a head of steam,” says David Noble, CEO at the Chartered Institute of Purchasing & Supply, which produces the PMI in conjunction with Markit Economics. “The two-year high in new business growth will do much to reassure firms we are on track for a recovery. Both domestic and export orders played their part, with consumer goods showing particular signs of traction.”

According to Markit’s senior economist Rob Dobson, the survey suggests that manufacturing output rose by around 0.5% during the second quarter of 2013.

“June saw output and new order growth hit rates not seen since early-2011,” he adds, “as a brightening domestic market and resilient overseas demand led to a broad-based expansion across the sector”.

Commenting on the PMI figures, Lee Hopley, chief economist at the manufacturers’ organisation EEF, says that the data “now seems to be lining up to show a gradual, but broad-based improvement in activity.

“The stronger PMIs in the past three months provide some confidence that we’ll see a manufacturing contribution to growth in the second quarter with a bit more momentum building into the second half of the year,” she adds. “All of this, alongside other tentative forecasts about modest growth, is a cause for cautious optimism.

"Activity indicators across Europe also made gains," Hopley points out, "providing some hope that the UK’s biggest market will help, rather than hinder, growth in the coming months. With the export component of the PMI at a two-year high we also need to see steady gains in our exports to non-EU markets if the UK is to make more progress on better balanced growth.”

• Manufacturing performance improved across Europe during June, with the Eurozone PMI hitting a 16-month high for the month. PMIs rose in every country except Germany. Ireland saw a marginal improvement in manufacturing business conditions and Spain experienced a stabilisation, while rates of contraction eased in France, Italy, the Netherlands, Austria and Greece.

Eurozone manufacturing output fell for the sixteenth successive month in June, although the rate of contraction was the lowest for this period. Production rose for the second month running in Germany and the Netherlands, and returned to growth in Italy and Ireland. Rates of decline slowed in France and Spain to the weakest in their downturns, but Austria slipped back into contraction.

“Eurozone manufacturing is showing welcome signs of stabilising,” comments Markit’s chief economist, Chris Williamson. “Both output and new orders barely fell during June, and on this trajectory a return to growth for the sector is on the cards for the third quarter.”

Unemployment in manufacturing remains an issue across Europe, falling for the seventeenth successive month in June, although the rate of job losses was the slowest since March 2012.




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