New data indicates UK manufacturing is firmly on the road to recovery

They showed the fastest growth of UK manufacturing production since July 1994. The CIPS' Purchasing Managers' Index (PMI) rose to 57.2 in March, up from 56.5 in February, its highest level since October 1994. The PMI – which is calculated from data on new orders, production, employment, supplier performance and stocks of purchases – has now remained above the no-change mark of 50.0 for six successive months. Output rose for the tenth consecutive month in March. The rate of increase accelerated to its highest since July 1994 and the second-fastest in the eighteen-year survey history. Gains in production reflected improving economic conditions, increased intakes of new work and efforts to reduce backlogs. New orders rose for the ninth month in a row during March, with the rate of expansion only slightly slower than January's six-year peak. Companies reported solid demand from both domestic and overseas markets, which they attributed to the recovery in global conditions, the launch of new product lines and clients rebuilding inventories. The recovery in the manufacturing sector remained broad-based by product category. The sharpest increases in output and new orders were seen in the intermediate goods sector. SMEs and large-sized enterprises also saw marked gains in both production and new work received. March data signalled an increase in new export orders for the seventh straight month. Although the increase was less marked than February's series record high, it was still among the fastest since exports data were first collected in 1995. There were reports of increased sales to clients in mainland Europe, China, the US, Brazil, the Middle East, South Korea and Taiwan. The weak sterling exchange rate was cited as a factor aiding export competitiveness. Staffing levels declined slightly, with job losses attributed to cost cutting initiatives, workforce restructuring and redundancies. However, companies maintained sufficient capacity to cope with the dual requirements of work on new and existing contracts. This was highlighted by a further modest reduction in backlogs of work, although the rate of decrease was much slower than the series average. Commenting on the PMI numbers, CIPS CEO David Noble (pictured) said that to see such a fast paced recovery in the manufacturing sector was hugely encouraging while Rob Dobson, senior economist at Markit said the data rounded off a solid start to 2010 for the UK manufacturing sector. Although manufacturing job losses were recorded in March, he concluded that this was mainly centred on large enterprises. SMEs, in contrast, reported higher staffing levels. EEF chief economist Lee Hopley, said they were further evidence of a more broad based recovery in manufacturing in the UK and across the globe. She went on: "As well as an improving domestic market, they should dampen criticism that manufacturers are failing to take advantage of a competitive currency and a more sustained upturn in export markets." At Barclays Corporate, head of manufacturing, transport and logistics Graeme Allinson said: "There is a renewed momentum to manufacturing recovery evidenced by the large growth shown in today's figures. This is an important confidence building affirmation that production levels are moving in the right direction following a few months of flatness in the sector, and these numbers are a far cry from the heavy declines of last year. "Orders are steadily increasing as the effect of re-stocking becomes apparent. Exports too have shown signs of picking-up but rapid growth in this area is unlikely as 60 per cent of UK exports head to Europe where growth rate is muted. This leaves the performance of UK manufacturing inextricably linked to European demand. "Major announcements recently bringing clean energy projects and automotive production contracts to the UK will boost confidence in the sector. This, combined with further investment from the government, which will hopefully be continued by the next administration, should bolster production as we move forward through recovery."