UK manufacturing surges and hits three-month high
New PMI data shows that manufacturing in the UK is outstripping the eurozone, even though it remains a key export market.
It’s no secret that the eurozone hasn’t yet managed to pull itself out of an economic lull. As the single biggest export market for the UK, Europe’s fortunes have been a cause for concern to commentators worries that slack demand would hold back UK manufacturing firms in particular. However, new data reveals that even though the eurozone is a key component of UK companies’ export strategy, British manufacturers are still performing strongly.
The latest UK purchasing managers’ index (PMI) from Markit and the Chartered Institute of Purchasing and Supply (CIPS) shows that manufacturing is at a three-month high, having reached a score of 53.2 in October. That’s far above the 17-month low of 51.5 recorded in September – and crucially, it’s way above the 50.0 mark which indicates growth.
But it also outstripped the eurozone over the same period. Markit’s PMI figures for the single currency area stood at just 50.6 in October, much closer to the 50.0 mark and only slightly higher than the 14-month low of 50.3 attained in the previous month. There was considerable variation between eurozone nations, with the Netherlands, Ireland and Germany reporting improvement as France and Italy declined. However, the indication is that the eurozone as a whole is not at a point where it can support uniform, sustainable growth.
PMI figures are based on a survey of manufacturers, yet they are often taken as an indication of the economy’s performance as a whole. So it makes sense that the UK is outperforming the eurozone – except for the fact that the eurozone is one of the UK’s most important trading partners for manufactured goods. Why isn’t the UK suffering from slack demand in the eurozone?
To an extent, the effects are being felt by UK businesses, since overseas demand took a hit. However, domestic demand was the real driver of growth in the PMI figures, indicating that consumption is on the rise in the UK. That points to improving consumer confidence, and further signs that more of the UK is starting to feel the economic recovery.