UK manufacturing on the road to recovery?

The report revealed that the manufacturing purchasing managers' index (PMI) rose to 49.6 in December in the UK, up from a revised reading of 47.7 in November. A reading of 50 or above is representative of growth. The survey also suggests that companies registered an increase in output linked to higher foreign demand, with new export orders rising for the first time in five months. New work came from clients in Germany, East Europe and China. Rob Dobson, senior economist at Markit and author of the PMI, said the upsurge in new export business countered some of the weakness in the domestic market and drew attention to the fact that job losses were also less widespread than in November, suggesting that pessimism about the coming year may have lifted a little. Dobson went on to point out, however, that over the fourth quarter as a whole, producers witnessed their worst performance since the second quarter of 2009. "Manufacturing will therefore likely be a drag on the economy in the closing months of the year," he said. Looking ahead, Dobson maintained that manufacturers are currently relying heavily on backlogs of work to prop up production. "This is only a temporary fix," he explained, "and the trend in overall order books needs to improve if the sector is to avoid a protracted period of lacklustre performance." CIPS ceo David Noble believes 2012 will bring fresh and familiar challenges for the sector. He commented: "It is encouraging to see output remain steady last month after the declines of recent months, but with the sector highly exposed to a shaky Eurozone, and reports of softening demand – ironing out economic problems in key export partners will be critical to how the sector performs. "There are fragile signs of growth centred on some very specific parts of the sector where demand remains strong, particularly consumer and capital goods, with some businesses even reporting record growth that defies the gloom. That said for every bright spot there is another business struggling to build momentum." EEF chief economist Lee Hopley said some manufacturing sectors were still growing relatively strongly, confirming the dual speed recovery seen in the official statistics in recent months. "This growth in orders and production has been bolstered by an improvement in export demand, which we'll need to see continue in the coming months to prop up growth across the wider economy," he said.