UK manufacturing exports lead the way to recovery

Commenting on the report, CIPS CEO David Noble (pictured) said: "This performance of the UK manufacturing sector is hugely encouraging as it is proving surprisingly resilient. It is now growing at a rate of knots - maintaining the momentum gained in Q1 and faring much better than we could have dared hope for this time last year. "Positively, purchasing managers reported growth across all sub-sectors and in companies of all sizes. What's more - given that stock levels are still relatively low, this is a trend we anticipate seeing for some time to come as firms work to try and meet increasing sales demand. "The real turning point will come when manufacturers feel confident enough to increase their investment and start to build capacity again. The good news is there are already signs this is starting to happen as employment levels are slowly rising on the back of strained capacity and backlogs of work reported for the first time in over a decade." Manufacturing production increased for the eleventh month running in April, with the rate of expansion only slightly below that of March. Underpinning the latest rise in output, said CIPS, was the sharpest growth in total new business since January 2004 and a record increase in new export orders. The forward-looking new orders to inventories ratio also stayed at an elevated level, suggesting production will continue to rise at a rapid pace in coming months. The index commentary claimed that higher levels of total new work reflected improved global market conditions, client restocking, and successful product promotions. Increased overseas sales were particularly commonly reported from customers in China, mainland Europe, the Middle East, North America and Scandinavia, in many cases aided by the ongoing weakness of the sterling exchange rate. Graeme Allinson, head of manufacturing, transport and logistics at Barclays Corporate, said: "The export-led growth reported in UK manufacturing in April is incredibly encouraging for the sector, as manufacturers are increasingly demonstrating their ability to take advantage of the weak Sterling position by breaking into new markets and growing orders through existing business relationships with offshore buyers. "When Sterling again begins to appreciate, manufacturers will have to work harder to retain clients and continue growth, but this looks to be a much more comfortable task than at the same point 12 months ago. "Several announcements around new clean energy projects and automotive production contracts bound for the UK have also fuelled a confidence in the sector not witnessed since the recovery following the recession of the early 1990s was well underway." Growth of output and new orders both remained broad-based by product category and company size, a positive development for the sustainability of the recovery. The rate of expansion in output was strongest in the intermediate goods sector. EEF Chief Economist, Lee Hopley, said that buoyant numbers from across Europe, the UK's largest market, provided some confidence that together with a weaker exchange rate, the recovery across the sector was looking more sustainable. However, the outcome of the election and the market reaction to it remained the big unknown on the horizon. Manufacturing employment increased for the third time in the past four months in April, and at the fastest rate since February 2007. This followed the sustained period of job cutting seen throughout much of 2008 and 2009. Higher employment mainly reflected increased production and sales requirements, amid evidence that current demand was testing capacity. This was exhibited by the first increase in outstanding business since backlogs data were first collected in November 1999. Low levels of stock at manufacturers and supplier delivery delays also contributed to the increase in backlogs. Suppliers' lead-times lengthened to the greatest extent for almost fifteen-and-a-half years in April, as suppliers faced logistical problems in meeting the strongest monthly increase in purchasing of inputs since October 1994. Subsequently, average inputprices rose at the fastest rate since August 2008. Price rises were reported for a wide variety of inputs including chemicals, feedstocks, food products, freight, fuel, metals, oil, paper, petroleum, polymers and timber. Manufacturers passed on part of the rise in their costs to clients in the form of higher selling prices in April. Output prices rose for the sixth month running and at the fastest rate since October 2008.