Belfast Telegraph

Manufacturing gets boost

Export orders are up despite worst quarter in three years

By Peter Cripps

The UK's manufacturing sector suffered its worst quarter for nearly three years despite an "encouraging" performance in December, figures showed.

The Markit/CIPS purchasing managers' index (PMI) survey, where a reading below 50 indicates a contraction, rose to 49.6 in December, from 47.7 the previous month.

The City had been expecting a fall to 47.3.

Manufacturers were boosted by stronger new export orders, which helped make up for the weakness of UK demand.

But the overall sector still declined in December, making its performance over the final three months of 2011 its worst since the second quarter of 2009.

The index has now shown a decline for five out of the past six months, fuelling fears the sector will lead the UK economy back into recession.

James Knightley, an economist at ING Bank, said: "While the headline figure is encouraging, it still suggests that manufacturing will drag GDP growth lower and that recession will remain difficult to avoid."

However, there was some good news for cash-strapped consumers, as factory gate prices rose at the slowest rate for more than two years in December. Companies reported that input costs fell for the second month in a row and the rate of decline was at its most noticeable since June 2009.

This was driven by the falling cost of chemicals, paper, plastics and steel.

The survey showed that production levels showed signs of stabilisation in December after recent declines.

New export orders rose for the first time in five months and at its fastest since April, with increased demand from Germany, China and eastern Europe.

But there were fears that some of the improvement in output was driven by companies eating into their backlogs of work, with outstanding business falling for the eleventh month in a row.