2
Nov
Manufacturing output rate 'rises'
The rate of growth in UK manufacturing output rose in October
for the first time since March, a closely-watched survey has
found.
The Chartered Institute of Purchasing and Supply (CIPS) said its
Purchasing Managers' Index rose to 54.9 from September's 10-month
low of 53.5.
With a figure of 50 or above indicating growth, it is a sign of
renewed strength in the manufacturing sector.
Yet, CIPS said firms also seemed concerned about future
inflation.
Price concerns
It found that manufacturers had increased their stock levels for
the first time since November 2007, and at the fastest pace in the
survey's 18-year history.
The report said that while firms were also doing this to guard
against raw material shortages, supplier delivery delays, concern
about "expected future price increases" was a key factor.
The CIPS report will give the Bank of England's Monetary Policy
Committee (MPC) much to think about when it meets on Wednesday and
Thursday.
There had been some signs that the MPC was moving towards
another round of quantitative easing (QE) - putting more fresh
money into the economy - to boost economic growth.
The CIPS report of a rise in the rate of manufacturing growth,
may mean the MPC holds off such a decision.
As most likely will CIPS warning of fears about higher
inflation, as QE can have any inflationary reaction.
Economist Philip Shaw, of Investec, said the latest CIPS data
would not be a "game-breaker" for the Bank.
He added: "But... it's likely to add to sentiment that the
committee shouldn't do anything for the time being."
The the Ernst & Young Item Club was more forthright, saying
the strong CIPS data was "the final nail in the coffin" for any
chances of QE this week.
Andrew Goodwin, senior economic advisor to the Ernst & Young
Item Club, said: "It is clear that the recovery still has
reasonable momentum behind it, and at this stage there is no
compelling case for the MPC to implement any further stimulus."
At the MPC's September meeting, one of its nine members called
for more QE, while another said interest rates needed to rise from
the current 0.5% to calm inflation.
The most recent official inflation figures showed that Consumer
Prices Index inflation was unchanged at 3.1% in August, above the
government's 2% target.
Small manufacturing boost
A separate manufacturing study has also said the sector is in good
health.
The CBI business organisation said a growing number of small
manufacturers were now expecting to increase production to meet
rising demand.
Its latest SME Trends Survey found that 31% of such firms expect
to boost output in November-January, while only 12% are predicting
a fall.
This gives a balance of +19%, better that the +9% figure
recorded for the past three months.
However, the majority of small manufacturers see no change in
output.
Russel Griggs, chairman of the CBI's SME council, said: "Smaller
manufacturers saw the pace of output growth slow slightly in the
last three months after the fillip from stock rebuilding
dwindled.
"But manufacturers expect a faster rise in production in the
coming three months as demand at home strengthens.
"It is encouraging that firms have increased their headcount
this quarter and are now planning to invest in plant and machinery,
and innovation."
Source: http://www.bbc.co.uk/news/business