UK manufacturing sector ‘shows signs of stabilisation’

The UK manufacturing sector showed signs of stabilisation at the end of 2011, according to survey data from Markit and the Charted Institute of Purchasing and Supply (CIPS).

However, figures for the Eurozone, the UK’s largest trade partner, showed the fifth successive monthly decline in the manufacturing sector.

The manufacturing purchasing managers’ index (PMI), where a reading below 50 indicates a contraction, rose to 49.6 in December in the UK, up from a revised reading of 47.7 in November.

Production was broadly unchanged in December following back-to-back contractions and the rate of decline in new orders slowed as the trend in new exports strengthened.

David Noble, chief executive officer of CIPS, said: ‘It is encouraging to see output remain steady last month after the declines of recent months, but, with the sector highly exposed to a shaky Eurozone and reports of softening demand, ironing out economic problems in key export partners will be critical to how the sector performs.’

In the Eurozone, PMI rose slightly to 46.9 in December, up from 46.4 the previous month, but the average PMI reading in the final quarter of 2011 was nevertheless the weakest since the second quarter of 2009. Levels of production and new orders fell across all nations for second month running.

‘Eurozone manufacturing is clearly undergoing another recession,’ said Chris Williamson, chief economist at Markit.

‘Worryingly, new orders are falling at a far faster rate than manufacturers have been cutting output, meaning firms have been reliant on orders placed earlier in the year to sustain current production levels.’