Manufacturers' Outlook

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Last week we saw several good news stories about manufacturing.

Our own Business Trends Survey showed the strongest output and orders balances in three years, followed by a twenty-five month high for the manufacturing PMI, and continued growth in output reported in official statistics. But what does this look like on the ground? We spoke to some of our members:

Firstly, there was stronger demand in a number of markets. Several manufacturers said they had noted an improvement in demand in the US, and in some cases Europe was looking stronger too, mainly driven by German demand.

There was also new demand from emerging markets, much of which was driven by new and innovative product launches in a range of sectors including automotive, electronics and medical equipment.

There was strength in a number of sectors, Aerospace and construction were reported as being particularly strong – in construction this was being driven by government policy announcements such as Help to Buy – but this strong growth was leading to concerns about the ability of the supply chain to respond quickly. We saw similar concerns reported in aerospace in 2010. Some manufacturers were responding by working more closely with suppliers, and in some cases investing in new supply capacity (though not always in the UK).

Our survey last week showed strong uptick in investment intentions. What this investment entailed varied from company to company.

  • For some manufacturers there would be long-term strategic investment projects, particularly in IT and e-commerce, while in other cases investment would happen if increased demand merited it.
  • For other manufacturers, although demand has picked up, some orders are quite small and have short lead times, so they have been responding to this by investing in improving their processes with a view to speeding up production.

Over the last few weeks our conversations with manufacturers have been more optimisitic, but uncertainty remains, and some of the positive recruitment and investment intentions will rely on this optimism translating into growth.

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