Manufacturing up!

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Another piece of good news on the manufacturing front as production rose by 1.1% in March - the second consecutive monthly gain. But today's data still leaves output down 0.3% in the first quarter - in line with the first estimates published last month.

As the chart below shows it's been far from smooth sailing over the past year with a volatile profile of monthly output changes across manufacturing.

Month-on-month % change in manufacturing output

Source: National Statistics

Also encouraging in today's data was the broad-based gains across the sector in March. Most sub-sectors posted some growth - the few exceptions being food, textiles and rubber and plastics. Over the quarter the strongest performers continue to be the transport sectors - motor vehicles and other transport.

The divergence in performance across different manufacturing sectors has been a feature of the industry over the past couple of years. Indeed - there's been something of a three-speed recovery with some up, some downs and some steady as she goes as shown below.

Index of production Jan 2010 = 100

Source: National Statistics

For many manufacturers weak demand at home and in major European markets has been a major factor in their performance over the past few years. But there are some sectors bucking the trend in both directions. Other transport - which is largely aerospace - has more long term certainty over orders, is benefiting from demand for more efficient planes and from robust demand in emerging markets. The sector has seen fairly consistent growth since the start of 2010.

In contrast, the pharmaceutical sector is navigating a fairly unique set of challenges as it faces up to competition from generic drug manufacturers, patent expiration on some blockbusters and squeezed healthcare budgets.

The food sector sits in the middle as domestic and export demand has stayed pretty steady, but households may switch between own-label and premium brands as incomes have come under pressure.

The rest of the year is likely to bring more of the same sector diversity. Overall we expect manufacturing output to steadily increase over the course of the year, but gains with the sector will not be evenly spread.

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