Manufacturing growth hits new high
Today’s figures for the manufacturing purchasing managers’ index are unambiguously good news. The Markit/CIPS monthly survey shows that the overall index rose to its highest level since 1994, and the purchasing managers responding to the survey reported employment growing at its fastest rate since the index was created in 1992. Exports have done particularly well. The output and production indexes are at their highest levels this century, post-production stocks fell again, prices are rising and the purchasing managers are building up stocks of raw materials and other input supplies.
Last month’s manufacturing PMI was good, this is better. Other indexes will come out this week – construction (tomorrow) and services (Friday) – and will show whether this strong recovery is confined to manufacturing. I rather expect construction to be weaker but the results for services will be more important. The competitive exchange rate and global recovery also benefit many service companies; services now account for a much higher share of UK output than manufacturing so the key question will be whether we can see the same sort of results in that sector.
Most cuts have not yet taken place so no, I don’t accept that these results show they have “succeeded”. The key question for economic policy is whether this progress will be maintained when domestic demand is much weaker – largely as a result of the cuts. Our recovery is dependent on our trading partners’ recovery – and would be very exposed to renewed difficulties in the banking sector. The performance of manufacturing is a cause for optimism but the recovery is still fragile.