UK manufacturing GROWS due to demand from China, Middle East and USA as 2018 looks STRONG
MANUFACTURING put in a “solid” performance in December, growing output and orders as the sector was boosted by increasing demand from China, Middle East and the United States.
UK oil and gas engineers on the manufacturing industry
Manufacturing has slowed slightly from a near four-and-a-half-year high but still continued to grow overall.
The Markit/CIPS UK Manufacturing purchasing managers' index (PMI) showed a reading of 56.3 last month, down from 58.2 in November, with economists expecting a figure of 57.9.
A reading above 50 reflects growth.
While output levels from consumer goods producers rolled back, intermediate and investment goods motored ahead thanks to rising demand from overseas.
UK manufacturing put in a 'solid' performance in the last quarter
UK producers enjoyed a healthy appetite from Europe, China, the Middle East and America, helping to drive a further rise in employment.
This means the manufacturing industry built up an average reading of 57 for the final three months of the year - its best performance since the second quarter of 2014.
Rob Dobson, director at IHS Markit, said UK manufacturing ended the year on a positive footing.
He said: "Although growth of output and new orders moderated during December, rates of expansion remained comfortably above long-term trend rates.
UK manufacturing rose in the last quarter of 2017
"The sector has therefore broadly maintained its solid boost to broader economic expansion in the fourth quarter.
"The outlook is also reasonably bright, with over 50 per cent of companies expecting production to be higher one year from now.
"The main growth engines were the intermediate and investment goods sectors during December, suggesting resilient business-to-business demand and capital spending trends, albeit in part due to rising exports."
Firms were also given a boost after input costs rose at the slowest rate for four months.
Chemicals, electrical goods, metals and paper were among per cent of firms are pencilling in a rise in production for the year ahead.
Samuel Tombs, Pantheon Macroeconomics chief UK economist, said the manufacturing industry will struggle to maintain momentum this year.
The Ford production plant
He said: "UK manufacturers have cut investment since the Brexit vote and are struggling to find skilled workers. As a result, work backlogs are increasing quickly and supply chain delays are worsening.
"These constraints will only worsen as the recovery continues, unless manufacturers suddenly ramp up investment.
"Meanwhile, the recent rally in oil prices - to 67 US dollars, from just 50 US dollar six months ago - which has been driven by OPEC supply curbs and tensions in Iran, has darkened the outlook for low value-added production.
"Accordingly, we expect the recovery in the manufacturing sector to lose its current vitality soon."
The pound rose 0.3 percent against the dollar at 1.35 following the update, and 0.3 percent lower versus the euro at 1.12.
The Office for National Statistics (ONS) confirmed last month that gross domestic product (GDP) grew by 0.4 percent in its final reading for July to September this year, rising from 0.3 percent in the first and second quarters.
Howard Archer, chief economic adviser to EY ITEM Club, said: "With December and November surveys from both the purchasing managers and the CBI also robust, the manufacturing sector looks likely to have produced another robust performance in the fourth quarter after expanding 1.3 percent quarter-on-quarter in the third quarter."