The overall output of British industry rose in June, the first month it has done so since March last year.
On a scale where 50 represents no change, the Purchasing Managers’ index figure for manufacturing output jumped to 52.1 last month from 48.1 in May.
The Chartered Institute of Purchasing & Supply, which publishes the PMI with Markit, stressed that the recovery was broad-based across capital, consumer and intermediate goods, as well as big, small and medium-sized companies.
The return to work at Honda’s Swindon plant in early June after a five-month lay-off is thought to have given a fillip to output last month. Honda itself may not be on the PMI’s panel but some of its suppliers are believed to be.
The wider index of manufacturing activity – based on new orders, employment, delivery times and stocks – stayed below the 50-mark for a fifteenth month, its longest sequence of decline. There was still an improvement, though, to an index number of 47 from 45.6 in May.
“After months of gloom and doom, there are some signs of relief for the UK manufacturing sector,” David Noble, chief executive at the CIPS, said. “One of the reasons may be that firms are adapting to market changes. Many are expanding their marketing activities and becoming more willing to discount goods in order to secure even the slightest hint of demand.”
Roy Dobson, senior economist at Markit, said: “Signs are there may be some traction in the upturn. The trend in new orders moved closer to recovery in June and the inventory cycle remained supportive of expansion.
“However, it is still too early to call an end to the downturn and forthcoming PMI releases will play an important role in identifying where manufacturing and the broader UK economy are heading later in 2009.”
New orders continued to fall last month but less so that at any time during the decline of the past 15 months.
Some companies reported weak markets at home and overseas, the CIPS said. Others, though, noted that promotional activities, new products, and price discounts were supporting sales. Input prices paid by companies for their fuel and raw materials fell by more than those they obtained for their products.
Independent economists welcomed the findings, though doubting whether the improvement had been enough to carry the wider economy back to growth in the second quarter of this year.
George Buckley, a Deutsche Bank economist, said: “I think we will be out of the recession in the third quarter but there are a lot of questions to be asked about how robust this recovery is going to be.”
Hetal Mehta, senior economic adviser to the Ernst & Young ITEM Club, said: “The continued increase in manufacturing activity is good news, although we are slowing inching towards positive activity.
“While the inventory is giving a temporary boost to the sector, the underlying weakness in demand may constrain a more robust recovery. Although the fall in employment has slowed, it will be a long time before the manufacturing sector sees employment levels increase.”
Colin Ellis, an economist at Daiwa Securities, said: “At the very least, today’s numbers are consistent with the manufacturing sector being much less of a drag on growth in the second quarter. If the past improvement in the services PMI is sustained and maps into the official data, that could mean the economy actually posts modest growth in the second quarter.”
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The manufacturing sector is benefiting markedly from the substantial stock adjustment that has taken place and there are signs that the more competitive pound is helping exporters. Nevertheless, manufacturers still face serious obstacles.”
