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Pace of decline slows in UK manufacturing output

MANUFACTURING output in the UK shrank again in November but the pace of decline is slowing, according to a closely watched survey.

The Purchasing Managers' Index (PMI) was at 49.1 for November, an improvement on the 47.3 recorded in October, but below the 50 mark that signals expansion.

The research, compiled by Markit and the Chartered Institute of Purchasing & Supply (CIPS), found strong growth in the consumer goods sector was unable to offset weaker performance in capital goods such as machinery and intermediate goods, which are components for a larger product.

New order volumes were broadly unchanged but backlogs of work declined at one of the fastest rates since early 2011.

The uncertain economic picture meant firms remain cautious on hiring, purchasing and holding stock.

The rate of job losses in the sector accelerated slightly from October.

The PMI further reported new orders from overseas were their weakest since August, with one in five exporting manufacturers reporting a decrease.

David Noble, chief executive at CIPS, said: "The most that we can say about November's manufacturing performance was that it was simply less bad than the previous month.

"Although the sector is stabilising, it is still being battered on two fronts with depressed domestic demand and weak demand from key markets overseas, particularly Europe and the US."

Although the UK economy returned to growth in the third quarter of the year, with gross domestic product rising 1% between July and September, some experts have attributed this to one-off factors and believe the underlying picture is much weaker.

Samuel Tombs, from Capital Economics, said: "The small improvement in the UK CIPS/Markit manufacturing survey in November does little to change the fundamental picture of a struggling industrial sector.

"Meanwhile, other indicators paint a weak picture.

"All in all, then, the recovery in manufacturing output in the third quarter seems increasingly likely to have been driven entirely by temporary factors."

The PMI survey also found the cost of raw materials such as metals and plastics has begun to ease but chemicals, energy and food are still rising.

Average selling prices in November increased slightly.

Rob Dobson, senior economist at Markit, said: "The [manufacturing] sector is merely stabilising, suggesting that the economy is still showing no signs of rebalancing towards goods production and exports and that manufacturing is unlikely to help prevent a possible slide back into contraction in the fourth quarter."

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