Setback to recovery in manufacturing sector

Dec 2 2009 by Iain Laing, The Journal

THE renewed recovery in the manufacturing sector slowed last month.

The Chartered Institute of Purchasing & Supply’s (CIPS) headline activity index – where a score over 50 registers growth – stood at 51.8, weaker than expected and down on the figure of 53.4 seen in October.

It is the fourth time in five months that the reading has shown growth, but analysts said the result highlighted the sector’s fragile position.

Howard Archer, chief economist at IHS Global Insight, said: “We suspect that November’s survey is a more realistic picture of the manufacturing sector than was indicated by October’s sharp improvement. The sector appears to be currently seeing limited recovery but is not racing ahead.”

The CIPS survey said output rose for the sixth consecutive month, while new export business rose at the fastest pace for almost two years as the weak sterling exchange rate boosted competitiveness overseas.

However, CIPS warned there was a long way to go before the sector is able to claim a return to full health.

CIPS chief executive David Noble said: “With new orders expanding at a slower rate than in October, there are already signs that the rebound in growth may be nearing its peak, leaving question marks over the longer-term outlook and the possibility of a double-dip recession.”

The number of jobs in the sector declined for the 19th month running but the rate of job losses was the slowest since May last year.

While the figures were softer than expected, Mr Archer said industrial production should still make a positive contribution to the UK’s GDP figure in the fourth quarter for the first time in two years.