05/08/2010
The manufacturing industry in the UK has hit a 15-month high as output continues to grow.
As reported by The Telegraph, the Chartered Institute of Purchasing and Supply (CIPS) hit its 10th consecutive month of growth. Despite the measure of activity index falling by 0.3, it remains close to May's peak of 58.1.
"Though the headline balance slipped, we should not forget that it continues to indicate a very strong pace of expansion," said Andrew Goodwin, senior economic adviser to the Ernst and Young ITEM Club.
The CIPS said that it expects further increases in production and new orders, which will help to increase employment for a fourth consecutive month.
Businesses in the manufacturing sector might need to turn to invoice discounting if they want to take on new staff but don't have the cash to do so, giving their business increased opportunity to grow and take advantage of the flourishing sector.
Rob Dobson, senior economist at Markit, CIPS' survey partner, explained that the manufacturing industry has recovered a third of the output lost during the recession. He said the data suggests "that the manufacturing sector will remain a strong contributor to gross domestic product in the third quarter, raising hopes that the growth of the economy may not slow too significantly from the 1.1% bumper figure already seen in the second quarter".
The news has lead to commentators claiming that inflation could be driven down as a result. James Knightly, from ING Financial Markets, said that "both input and output prices [are] declining, which should help to reinforce their view that inflation will gradually fall back towards target."
Laura Nineham