Manufacturing output back in positive territory

The data for April from the Office for National Statistics showed that output from the manufacturing industriesrose by a modest 0.2% for the second month following revisions to March data. The steadier three-month figure showed up a 2.8% decrease in output compared with the previous three months and 13.2% lower than the same period a year ago. Commenting on the figures, EEF head of economic policy, Lee Hopley, said: "Manufacturing has stabilised and all the indications are that we have passed through the worst phase of the recession. However, conditions remain patchy and it remains far too early to begin talking of a sustained recovery. While the cheaper pound will make our exports more competitive, manufacturers are increasingly concerned by its volatility, while a sustained rise in oil prices will eat into margins and reduce the purchasing power of its customers." At Barclays Commercial Bank, head of manufacturing, transport and logistics Graeme Allinson said that despite the 12.6 per cent year on year decline, it was apparent that the rate of decline was continuing to slow, evidenced by the 0.2% monthly increase. He went on: "Output levels [that were] cut as retail stocks were depleted in winter months are beginning to see the effect of a call to replenish stock. The May PMI (Purchasing Managers Index) echoes indication of the drive to build fresh stock. However, it remains to be seen if this will translate into a sustained increase in demand. "Better manufacturers are looking to diversify their supply chain and seek out new markets for their product. Although the decline in manufacturing persists across Europe, exploiting the advantageous exchange rates with our biggest trading partners in the euro-zone will see the UK well positioned for a pick-up in demand. Diversification, cost management and above all experience of tough times in the past will see British manufacturing turning the corner." Tom Lawton, head of manufacturing, at BDO Stoy Hayward said: ""Over the past 12-18 months the manufacturing sector has been battered by the winds of economic uncertainty. Despite showing only a small rise in manufacturing output, today's positive result will come as a welcome relief to many in the sector. "Today's figures are the first rise the sector has seen in more than 12 months and could herald the beginning of the recovery for the sector. The results also echo BDO Stoy Hayward's most recent Manufacturing Optimism Index which suggested that the sector is starting to show the first signs of rallying, with manufacturing optimism and output levels both at a seven month high. "However, many will be sceptical about today's results as manufacturing output is still 13.2 per cent lower than the same three months a year ago," Lawson concluded.