Growth figures give fragile recovery a boost

Feb 2 2010 by Iain Laing, The Journal

BRITAIN'S fragile economic recovery was given has been boosted by figures showing growth in the manufacturing sector hit a 15-year high last month.

The sector started 2010 in resurgent fashion, with new orders setting a multi-year high and employment growing for the first time in nearly two years, according to the Chartered Institute of Purchasing & Supply (CIPS).

Its monthly headline activity index, where a score over 50 registers growth, showed a reading of 56.7 in January - the highest level since October 1994.

The result, ahead of an upwardly revised 54.6 seen in December, was far better than expected after many economists pencilled in a small decline.

A rise in employment also came as a welcome development for the sector, albeit following a “slight increase“, said CIPS.

UK manufacturers have cut many thousands of jobs after being hammered by the recession.

But the weak pound is providing a much-needed boost, with new export orders at the highest level since CIPS began collecting export data in 1996.

This, combined with improvements in domestic demand, helped total new orders rise at the fastest pace in six years.

David Noble, CIPS chief executive, said the January result was “a great way to start the year“ for the embattled sector. He added: “Although the manufacturing sector represents a smaller proportion of total UK GDP than 10 or 20 years ago, it is still a very important part of the economy.

“It is therefore encouraging to see such strong growth and it suggests we are coming out of recession much quicker than previously feared.”

The figures add to hopes for a stronger economic fight back after the meagre 0.1% growth in gross domestic product recorded in December.

EEF region director Alan Hall said: “Manufacturing continues to gain further momentum as a weaker sterling finally helps companies take advantage of growth in overseas markets.

“An export driven recovery looks likely to take centre stage as the main driver for growth across the economy, although rising costs mean that manufacturers will have one eye on inflation and continued cost control.”

Despite hitting a 15-year high, there was caution over the path of the sector’s recovery over the year ahead.

Jonathan Loynes at Capital Economics stressed manufacturing output still had a “very long way to go to get back to its pre-recession peak“.

“January’s CIPS report on manufacturing offered hope that the industrial recovery is gathering momentum, but there are still major uncertainties.”