UK manufacturing accelerates to 14-month high in May

3rd June 2013

UK manufacturing has received a welcome boost as better-than-forecast numbers show May hit a 14-month high writes Philip Scott.

The UK manufacturing Purchasing Managers Index published today, hit 51.3 in May, up from a revised-up 50.2 in April. The survey is broadly encouraging, suggesting that manufacturing activity is on course for clear growth in the second quarter. This would be a real boost to overall growth hopes for the second quarter as manufacturing output contracted by 0.3% quarter-on-quarter in the first quarter following a pretty torrid 2012.

The survey indicated that overall activity grew for a second month running and at the fastest rate for 14 months. Output growth picked up appreciably in May, with expansion reported across consumer, investment and intermediate goods.

In addition, with orders at a 25-month high in May and stocks depleted, prospects look decent for output growth in the near term at least. Further good news saw manufacturing employment rise in May at the fastest rate for 14 months, although the increase was modest.

While manufacturing represents only some 10% of UK GDP, rises in the sector typically have a knock-on impact on other sectors.

Dr Howard Archer, chief European & UK economist at IHS, says: “The survey is encouraging across the board, and is a boost to hopes that the UK economy may be gradually establishing a firmer footing. However, the sector still faces a tough job to establish sustained, significant improvement. In domestic markets, manufacturers currently face current relatively muted investment intentions, limited consumer purchasing power and tight public spending.

“Still significant concerns about the outlook are likely to be limiting the willingness of many customers, or potential, customers to commit to buying big-ticket manufactured goods in particular. Meanwhile, subdued and stuttering global economic growth, and Eurozone economic weakness in particular, is a constraint to foreign demand for UK manufactured goods. It is encouraging though that the May purchasing managers’ survey indicated that there had been a pick-up in orders from North America, East Asia, Russia, Germany and France.”

Archer believes also that the improved figures reinforces belief that the Bank of England is likely to sit tight on Quantitative Easing or any other stimulative action at the MPC’s June meeting this week. “We think more QE will eventually occur, but most likely after Mark Carney tales over as Governor in July,” he adds.

10 thoughts on “UK manufacturing accelerates to 14-month high in May”

  1. Londoner says:

    Can anyone explain to me why a government cant protect the depositors, let the bank go bankrupt and take state ownership of the bank?

    It’s hard to see Portugal improving. It’s a vicious downward spiral. Nice countryside though.

    1. Anonymous says:

      Depositors are (in theory) protected by the govt guarantee up to 100,000 euro. This exists to protect savers, not banks or bankers.

      I think the UK would have been better to auction the bankrupt RBS and use the funds (if any) towards depositors.

      It is a very good question why RBS was “rescued” at great cost to taxpayers. The politicians responsible should be held accountable for wasting public money. Oh silly me, it’s for the thousands of RBS workers who vote in Kirkcaldy – Doh !

    2. Anonymous says:

      Hi Londoner and welcome to my part of the blogosphere

      Portugal is indeed a lovely country. But sadly it too is in the realm of regarding its banking system as like the “precious” of the Lord of the Rings. But adding to ExpatInBG points out below one of the worst cases of this was RBS in the UK where your suggestion would have been better than what we have done. It would for example have dealt with Fred Goodwin’s pension…Instead we reduced the pensions of ordinary workers and the bank still gives us surprises in 2014.

      Oh and no-one has been charged in court over the 2008 rights issue prospectus.

      1. Noo 2 Economics says:

        Nor will there be if this http://www.supremecourt.gov/opinions/13pdf/13-317_mlho.pdf is anything to go by……

  2. Forbin says:

    Hello Shaun ,

    I guess this means that Portugal cannot hit the housing asset bubble recovery button

    young earners leaving and old people who can not get mortgages

    and not enough overseas purchasers either ……

    Expat is right – they should allow the Banks to fail , then leave the Euro or visa versa ?

    Forbin

    1. forbin says:

      found this yes minister banking reference

      “your a banker !”

      ” yes but I never understood economic theory ” priceless !!

      covers politicians as well , had to laff

      http://www.youtube.com/watch?v=KgUemV4brDU

      1. Anonymous says:

        Hi Forbin

        “If you are going to join the board when you retire..” Ah yes the merry go round from the public-sector to such jobs! As to Sir Desmond Glazebrook who would have thought that such a comedy caricature would turn out to be a real life description of bank directors?

        As to house prices it looks as though there are some rises going on.

        “In the first quarter of 2014, the House Price Index (HPI) increased 4.0% when compared with the same quarter of the previous year. This figure was 3.4 percentage points (p.p.) higher than the rate recorded in the last quarter of 2013, a result which reversed the series of annual price reductions observed between the fourth quarter of 2010 and the third quarter of 2013. In the quarter under analysis, the annual rates of change for the existing and new dwellings market segments were 4.7% and 2.9%, respectively. Compared to the previous quarter, the HPI recorded a price variation of 1.3% in the first quarter of 2014 (2.3% in the fourth quarter of 2013). The rolling 4-quarter average rate of change was 0.3% in the first quarter of 2014 (-1.9% in the fourth quarter of 2013).”

        The official story is that there was no house price boom in Portugal although I do wonder how that works for the Algarve!

  3. Anonymous says:

    Something wonderful – just let the bank go bust Iceland style

  4. Londoner says:

    Why would they do something sensible?

  5. dutch says:

    Aye,and maybe forgeo their bonuses this year…

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