Mixed greetings for latest manufacturing output data

The data from the Office for National Statistics showed output decreasing by 1.2 per cent in the three months to May 2009 compared with the three months to February 2009 and was 13.1 per cent lower against the same three-month period a year ago. Output decreased in nine out of the 13 sub-sectors – most notably in the metals industries (down 4.6%), machinery (down 5%) and transport equipment (3.2%) – and increased in four sub-sectors – including chemicals (2.2%), paper and printing (1.4%) and food & drink (1.4%). The more volatile single month data for May showed output down 0.5% on the previous month, affected by a 2% fall in paper and printing and 1.7% in machinery. The most significant increase was 3.7% in the 'other' category of manufacturing industries. Graeme Allinson, head of manufacturing, transport and logistics at Barclays Commercial Bank, said manufacturing seemed to be reaching the bottom of the recessionary curve. "These figures indicate a continued slowdown in the rate of decline, and point the way towards eventual recovery," he said. "The PMI (Purchasing Managers Index) data for June shows a slower but nonetheless continued rate of improvement in manufacturing output. This reinforces the hope that the destocking which held the sector back in the first quarter will now give way to a re-invigorated supply chain and a pick-up in overall production levels. "Globally, Sterling remains competitive and will act as a supporting stimulus as manufacturing once again finds its feet. The increase in both production levels and demand in India and China are a good indication of international recovery, and this can only be good for UK manufacturers." Stephen Radley, chief economist of the manufacturers' organisation EEF said: "While the decline in manufacturing output in May was not dramatic, it shows that we must not take the recovery for granted. Conditions in domestic and export markets remain tough and the focus for the government and the Bank of England must remain on fighting the recession." Tom Lawton, head of manufacturing, at BDO Stoy Hayward said it was disappointing to see the three month fall. Coming after positive signs in April, it showed how volatile the sector and the economy was and how manufacturers needed to maintain a strong focus on cost control, he went on. Bank lending and credit insurance were impacting on short term recovery in the sector and companies continued to report that they are not yet seeing the benefit of government funding initiatives. "There are clearly several hurdles to negotiate in the road to recovery, but we are hopeful that some sectors within manufacturing will see an upturn in the near future. But it is likely that the sector as a whole will continue to be weighed down with the huge difficulties facing the automotive sub sector," Lawton said.