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Survey figures reveal surprise UK manufacturing growth for September


Manufacturing activity in the UK returned to "moderate" growth in September for the first time in three months, according to figures from financial analysts Markit and the Chartered Institute of Purchasing and Supply (CIPS).

However the senior economist who compiled the data said that although the figures were "positive", the sector's performance had "weakened substantially" since near-record growth was reported at the start of the year.

The Markit/CIPS UK Manufacturing Purchasing Managers Index (PMI) (3-page / 85KB PDF), which measures changes in activity levels across hundreds of manufacturers, rose to 51.1 last month – above the score of 50 which indicates growth.

According to media reports, economists had predicted that the manufacturing sector would contract in September. A figure of 48.6 was forecast, according to a BBC report.

The PMI is based on a monthly survey of purchasing executives at more than 600 firms.

August's PMI, which had previously been reported as reaching a "26-month low" of 49.0, was revised upwards to 49.4.

Employment in the manufacturing sector fell for the third month in a row, with job losses linked to "company restructuring, non-replacement of leavers and the ongoing subdued underlying trend in new orders", the survey said.

Levels of export business contracted more than in any month since May 2009, with reports of lower demand from the US, Europe, Asia and the Middle East.

A separate survey (3-page / 85KB PDF) of manufacturers in the Eurozone revealed a fall in new orders across the area, with an overall PMI at a 25-month low.

Markit warned that a large part of the UK increase related to companies working through orders already on their books, with the "fastest depletion of backlogs of work" for two years. However the total new orders placed rose slightly in September, which companies surveyed linked to a "modest improvement in domestic market conditions".

John Tyerman, an expert in manufacturing law with Pinsent Masons, the law firm behind Out-Law.com, said that the increase in output was "encouraging", particularly following on from the slump in July and August.

"However, whilst these figures were assisted by some growth in new orders, we are a long way from the much stronger figures that we saw earlier in the year. Manufacturers are fighting hard to maintain order levels," he said. "Unfortunately, with concerns over the Eurozone debt crisis being felt around the world and output from US and Asian factories following a similar trend, exports are under extreme pressure and the outlook for the next quarter remains uncertain."

Markit's senior economist Rob Dobson, who compiled the survey, agreed that it was "hard to escape the fact that the sector's performance has weakened substantially" since the earlier growth surge.

"It looks as if the latest expansion in output was largely achieved through the fastest depletion of backlogs of work for two years. This is only a temporary solution and the replenishment rate of order books will need to improve if manufacturing is to recover its former momentum," he said.

"These data suggest that the positive contribution of manufacturing to the broader economic recovery is likely to remain modest, at best, through the remainder of the year."

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