Manufacturers report strong end to 2009

Orders and production up but firms wary of effects of recession

The manufacturing sector enjoyed a strong end to the year with production increasing at the fastest rate since November 2007, new figures have shown.

Data from the Chartered Institute of Purchasing and Supply (CIPS) suggested new orders rose at the fastest pace for 29 months in December. The CIPS/Markit headline Purchasing Managers’ Index (PMI) reached a 25-month high of 54.1 in the final month of the year, up sharply from its level in November, when a relatively weak figure had raised concerns about the strength of the sector’s recovery.

The PMI figure is calculated using data on orders, production, employment, supplier performance and stocks of purchases. Manufacturing production increased for the seventh consecutive month and at the fastest pace since November 2007 in December. Manufacturers’ organisation the EEF has said it expects the sector to grow by a modest amount this year following an extremely challenging 2009.

According to the CIPS survey, job losses continued at engineering firms, but at a slower level. Some small and medium-sized enterprises reported a slight increase in staffing levels. 

David Noble, CIPS chief executive officer, said: “Despite operating against one of the toughest economic backdrops ever witnessed, 2009 saw the UK manufacturing sector slowly regain its footing and end the year in comparatively strong shape.

“On the back of significant increases in production and new orders, the December PMI posted its strongest reading in more than two years.”

But Noble warned that companies were still battling the effects of the recession. “The troubles of the downturn are still close to hand and firms are keeping a beady eye on all activities. In particular, purchasing managers said new order growth was dependent mainly on domestic demand, while the capital goods sector continued to suffer from falling production levels.”