UK Manufacturing Continues To Recover

It might come as a shock to anybody who lived through the Thatcher years, but the UK continues to have a manufacturing base, although the dominant term in the UK economy has long since been the service sector. However, UK manufacturing is enjoying its best level of growth for three years, according to the most recent Markit Purchasing Managers’ Index (PMI) for the manufacturing sector. The manufacturing PMI figure for November came in at 58.4, up from an October reading itself revised upwards to 56.5 – any figure above 50 represents growth in the sector being studied.

Within the manufacturing sector data, the employment index also showed a healthy improvement from 51.9 in October to 54.5 last month. According to Markit’s Rob Dobson, this equates to the creation of 5000 new jobs within the sector per month. "UK manufacturing continued to hit the high notes in November. It looks as if the strong recovery in the sector is translating into meaningful job creation," he said.

Further evidence for resurgence in the sector was provided by the new orders figure which rose from an October level of 61.3 to 64.6 last month; this is the best figure seen for the manufacturing sector for 19 years.

The Bank of England has stated in their forward guidance that interest rates will not increase until unemployment falls below the 7% mark, a level the Bank does not expect to see for another three years. Unemployment currently stands at 7.6% (for the three months to September), but the economic recovery in the UK is such that some analysts are predicting that the Bank of England may need to review its time frame. A dip below 7% unemployment would not trigger an interest rate hike in itself, but it could be introduced to lower inflation, if this were to become problematic.