Manufacturing Outlook: 2012 likely to see continued divergence between sectors

Subscribe to Campaigning blog feeds

Published

This week the Index of Production showed that manufacturing output fell by 0.7% between March and April. The monthly figures can be quite volatile, but this follows on from the first quarter of the year, in which growth in manufacturing was flat.

However, the headline manufacturing figures mask a considerable degree of sectoral divergence. For example, in the first quarter of the year the consumer-facing food and drink sector contracted by 2.5%, but the export-focused motor vehicles sector grew by 3.1%.

Our recent Business Trends survey also reflected this divergence between sectors. Those sectors which are consumer-facing, or exposed to big swings in commodity prices, are facing significant headwinds. These include electronics, food & drink, and chemicals & pharmaceuticals.

Further out in 2012 assuming inflation starts to soften as expected, and the consumer recovery begins to gain momentum, these sectors should begin to see the benefit of this. However, the ongoing crisis in the Eurozone continues to dampen confidence for the time being.

The affects of the Eurozone crisis on Business Confidence have also impacted to outlook for global investment. Mechanical engineering has been one of the stronger sectors in the recovery, but the weaker investment outlook means that – while we still expect growth – this is likely to be at a slower pace than in 2011.

The strongest performing manufacturing sectors have been those with high levels of exposure to growing emerging markets, such as motor vehicles and other transport (which includes civil aviation), which have benefited from strong demand.

Author

This person has now left EEF. Please contact us on 0808 168 1874 or email us at enquiries@eef.org.uk if you have any questions.

Other articles from this author >
Online payments are not supported by your browser. Please choose an alternative browser or make payments through the 'Other payment options' on step 3.