Industry leaders warn against over-optimism
Nov 3 2009 by Iain Laing, The Journal
MANUFACTURING industry leaders warned against over-optimism as a key industry monitor showed the sector’s output is at the highest level for nearly two years.
EEF region director Alan Hall tried to dampen any attempts to find clear evidence of “green shoots” in the Chartered Institute of Purchasing & Supply’s (CIPS) headline activity index.
The index - where a score over 50 registers growth - reached 53.7 in October, its highest level since November 2007. The jump from an upwardly-revised September score of 49.9 is the third biggest monthly rise in the survey’s history.
CIPS chief executive David Noble said: “It appears the manufacturing sector has turned a corner and is starting to pull itself out of recession.”
Export levels rose for the third successive month helped by a weak pound, although staffing levels in the sector fell for the 18th month in a row.
But Mr Hall said: “These figures may be signs that industry is beginning to benefit from a weak pound and the ongoing inventory cycle.
“However, given the low-base from which we’re starting we still can’t take a strong, sustainable recovery for granted. The fourth quarter was always going to be better than the rest of the year and with fiscal stimulus set to be withdrawn in January the dangers of a double dip are still very real.
“The Government and the Bank of England still have their work cut out if any pick-up in orders is to turn into business confidence on the ground.”
The CIPS survey said there were “marked rebounds” in expansion rates for both production and new orders, although Mr Noble said manufacturers remained “highly vulnerable”.
“The sector has been so hard hit since the recession began that it will be a long time before it returns to its previous level,” he said.
The figures follow shock data showing a 0.4% decline in UK output during the third quarter of 2009 when experts had predicted a pull out of recession - partly based on deceptively strong industry survey readings.
The Bank of England will decide this week whether to give a further boost to the economy.
IHS Global Insight’s Howard Archer said: “Taken at face value, the PMI survey raises hopes the industrial sector will expand in the fourth quarter for the first time in two years, helping the overall economy to finally return to growth.”
