In January of this year, we published our Executive Survey report – a look at manufacturing executives’ views on the year ahead, how are the expectations stacking up against reality?
What were manufacturers expecting in January?
The survey showed that manufacturers’ confidence about the economy and the manufacturing sector in 2015 had weakened from the moderate outlook expected at the start of 2014.
There was confidence that the positive trends of 2014 would remain, albeit the pace of growth companies were planning for was more modest and the feeling of optimism was less prevalent than it was at the beginning of 2014.
How have things panned out so far in 2015 then?
Things are roughly on the track of the Executive Survey’s headline of “growth, but weaker”.
Our quarter 2 Business Trends survey results for 2015 show that we should expect more of what we had seen already in 2015 from manufacturing over the next couple of quarters – that is growth, but at a more modest pace. The balance of manufacturers reporting an increase in output over the past three months dropped to 5%, the lowest response balance since 2013q1. The quarter 1 survey expectations had anticipated something of a slowing in activity in the second quarter, but the outturn was weaker than expected.
The latest PMI has echoed our survey’s sentiments. As Felicity said in her blog earlier in the week, June’s PMI came in at 51.4 – the twenty-seventh month of expansion in the manufacturing sector, but it was also a twenty-six month low. So whilst manufacturing is still growing, it is at a reduced pace and more modest than it has been over the past two years.
Forecasted growth for 2015
At the beginning of this year, our forecast for manufacturing output stood at 2.0%. Considering both the weaker than expected outturn in official data for manufacturing and the weaker overall indicators from our Q2 Business Trends survey, our economists revised down our forecast for manufacturing in 2015. We expect output to expand by 1.5%, down from 1.7% in our Q1 report.