Manufacturing growth accelerates

The pick-up in growth reflected the resilience of the domestic market as overseas demand was impacted by the ongoing economic weakness of the Eurozone and the euro-sterling exchange rate, according to financial information provider Markit. At 53.2 in October, recovering from September's 17-month low of 51.5, the seasonally adjusted Markit/CIPS Purchasing Manager's Index (PMI) remained above the neutral 50.0 mark for the 20th consecutive month. The latest reading is slightly above the third quarter average of 53.0. Manufacturing production rose for the 19th successive month in October. Although the rate of expansion remained below the average for the year to date, it nonetheless recovered from September's low to reach a three-month high. The latest scaling up of output was underpinned by improved inflows of new work and efforts to clear outstanding business. Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "UK manufacturing continues to look pretty resilient with the PMI in expansionary territory despite the on-going economic challenges in major European markets. With domestic demand providing a good boost to production levels across a wide base of manufacturing activities, we should see the sector post its seventh consecutive quarter of growth in the final three months of this year. "This sustained run of positive data from the sector should continue to support some rebalancing of activity across the economy – a process that government policies must continue to promote in the coming months." Manufacturing employment rose further during October. The continuation of the current spell of job creation is a positive in itself, but it is worth noting that the rate of increase slipped to its second slowest since last June. Staffing numbers rose sharply at SMEs, but were held steady at larger scale producers. David Richardson, head of manufacturing at Lloyds Bank Commercial Banking, mid markets, said: "Manufacturers are resilient and have shown that the sector can respond to wobbles in the economy and get growth back on the agenda." However, he warned: "Company bosses will need to keep a keen eye on their finances, particularly in managing working capital, to accommodate fluctuating production if they are to see themselves through the next few months of instability." Rob Dobson, senior economist at Markit, added: "It is positive to see the sector break its recent sequence of slower growth. Continued growth of employment, especially at SMEs, suggests that the recovery in the labour market is holding sway. Another positive is the continued resilience of the domestic market... "However, this was partly offset by a further drop in new business from overseas, as exporters were hit by a near-stagnant Eurozone economy and a relatively strong euro-sterling exchange rate. Reports from companies mentioning slower inflows of new business from markets such as the US and China also paint a less than rosy picture for exports moving forward."