By: Dr. Mike Campbell
For anybody who lived through the Thatcher years, it comes as a bit of a shock to learn that the UK still has a manufacturing base, but it does (heavy industry, such as ship building, steel making and coal is, alas, another story). The good news for the UK economy is that the manufacturing sector managed its best performance in ten months according to a closely-watched survey.
The survey was conducted by Markit and their Purchasing Manager’s Index (PMI) for March came in at 52.1. A figure above fifty indicates growth whereas a number below 50 implies that the sector is contracting. The February figure came in at 51.5 (having been revised upwards from 51.2).
The data has been taken as a welcome sign that the UK may yet avoid falling back into a technical recession when Q1 2012 figures are revealed. The UK economy shrank by 0.2%, so a failure to return to growth this quarter would put the UK back into recession.
The survey indicated that conditions within the UK remain difficult with hikes in the cost of oil products and also metals, but it noted that both domestic and overseas demand had picked up. The March figures were bolstered by clearing a backlog of existing orders, but there was also an influx of new orders which rose at their fastest pace in a year.
"UK manufacturing has made a brighter than expected start to 2012, with PMI data pointing to output growth of around 0.3% in the first quarter. This is obviously nowhere near a strong pace, but it is at least sufficient to prevent the sector from remaining a drag on broader GDP growth. Inflows of domestic and export orders also showed some improvement in March, but exporters are having to tap markets further afield as conditions in the eurozone remain lethargic," said Rob Dobson, a senior economist at Markit.