Manufacturing PMI increases for second consecutive month but ongoing decline in export orders continues to be a thorn in the side - ITEM Club

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s PMI manufacturing figures:

  • An encouraging start to the new year, with initial signs of improvement in the domestic market
  • But the ongoing decline in export orders continues to be a thorn in the side for UK manufacturers
  • Although manufacturing will probably contribute to growth in Q1, GDP growth is still expected to remain flat

“An encouraging start to the new year, with the manufacturing PMI reporting an increase in activity for the second consecutive month. Signs of an improvement in the domestic market, particularly the increase in new orders, are a welcome turnaround from the weak trends seen last year.
 
“The ongoing decline in export orders continues to be a thorn in the side for UK manufacturers. Although today’s figures indicate that stronger momentum is building into 2013, the key question now for manufacturers is the degree to which greater signs of stability in the Eurozone and the fiscal agreement in the US translate into stronger export demand. If export demand begins to strengthen, we should see the start of a sustainable recovery in the manufacturing sector.
 
“Today’s figures suggest that manufacturing will probably contribute to growth in first quarter. But with the sector accounting for a relatively small share of the UK economy, GDP growth in Q1 is still expected to remain flat.”