On the up | EEF

On the up

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Index of production data out this morning provided further good news about the manufacturing sector, with output increasing for a fifth consecutive month in April.

Manufacturing production rose 0.4% over the month, driving the three-month rate of growth up to a robust 2%, the fastest pace of expansion in almost four years. Another month of solid data supports the positive sentiment evident in our latest Manufacturing Outlook report, which indicated robust momentum in new orders. Underpinned by solid demand at home, the sector is firmly on track to expand for a fifth successive quarter in Q2.

Industrial production and manufacturing(2010=100; seasonally adjusted)

Source: Office for National Statistics

Plastic fantastic

Rubber and plastics manufacturers led the way in April, reporting the largest year-on-year rise in output since the ONS began recording subsector production levels in 1998. Solid gains were also reported in the manufacture of transport equipment (with growth driven primarily by production of motor vehicles) and in food, drink and tobacco—output in both of these subsectors has now risen back above pre-crisis levels. Activity across the manufacturing sector has broadened out impressively over the past year, with annual output increasing in nine of the 13 subsectors in April.

The largest downward contributions to year-on-year manufacturing output in April came from the manufacture of basic pharmaceutical products and the manufacture of coke and refined petroleum, maintaining the subdued trends in these subsectors over recent years.

Growth in nine of thirteen subsectors(% change in output, year to April 2014)

Source: Office for National Statistics

Manufacturing production is now at its highest level in five years, despite the still subdued trend in external trade—the value of UK goods exports has largely flatlined since mid-2011. The rebalancing story clearly has a long way to run, and the top chart above shows that there is still considerable scope for further catch-up in the sector. The overall level of manufacturing output remains 7% below its pre-downturn peak in early 2008.


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