Rapid rise in export orders a sign of recovery

The data provides evidence that the country’s economic recovery may be gaining a broader base.

Britain’s manufacturing sector has grown strongly in recent months, but it remains around nine per cent smaller than before the financial crisis, unlike the services sector which has now recovered the ground it lost in the 2008-09 recession.

Data company Markit said its October manufacturing purchasing managers’ index edged slightly lower to 56.0 from a downwardly revised 56.3 in September, but remained close to August’s two-year peak of 57.1.

Index readings above 50 indicate expansion, and Markit economist Rob Dobson said the survey pointed to British manufacturers outperforming their foreign peers, enjoying quarterly growth of 1.0 to 1.5 per cent.

“Despite only accounting for less than 11 per cent of the economy, the current strength of growth being seen in manufacturing means the sector will still provide a major boost to the economy in October,” Mr Dobson said.

The economy grew by 0.8 per cent in the three months to September, its strongest performance in over three years, helped by a 0.9 per cent expansion in the manufacturing sector.

However, earlier this week the Bank of England Governor Mark Carney said growth was still largely reliant on consumer demand and rising house prices.

He said he hoped that new businesses would get better access to finance as the recovery strengthened.

The Government and the Bank of England have also been banking on improved demand for exports to help growth. The PMI sub-index for export orders rose to 56.5 from 53.6, its highest level since February 2011, with broad-based improvements in demand from Asia, the United States, mainland Europe, the Middle East and Russia.

“The UK is no longer being left behind in the chase to benefit from improving global markets. A strengthening domestic market, riding on the crest of a wave from recent positive economic news, also remains a prime driver of the recovery,” Mr Dobson said.

The news was less positive for job seekers, with the pace of hiring falling to its lowest since June. Inflation pressures eased marginally, with increases in raw material costs and factory-gate prices slowing slightly, though they remain rapid by the standards of the past two years.

Howard Archer, chief UK and European Economist, at IHS Global Insight, said: “A very decent manufacturing purchasing managers survey for October provides some reassurance on the strength of the economy after some recent signs that it has lost momentum after a surge in activity during the second and third quarters.

“The purchasing managers survey follows on from a CBI survey pointing to markedly softer retail sales in October and a small dip in consumer confidence.

“The CBI industrial trends survey for October was also softer, although it was still relatively decent.

“The solid October purchasing managers survey indicates that the manufacturing sector is still seeing decent growth at the start of the fourth quarter and is on course to make a healthy contribution to GDP growth in the fourth quarter after expanding 0.9 per cent quarter-on-quarter in the third quarter.

“The survey not only shows decent output growth in October but solid new orders which bodes well for production in the near term at least.

“The purchasing managers report manufacturing activity held up pretty well in October. The survey shows manufacturing activity expanding for a seventh successive month, and at a rate not far below the 30-month high achieved in August. Both the output and the new orders indices held up well in October.

“Furthermore, the strength in output and orders was reported to be widespread across sectors in October. Domestic demand was healthy while it was encouraging to see export orders growth improve markedly to a 32-month high with improved demand coming from widespread destinations.”