Manufacturing growth: some genuinely good news
Today’s Markit/CIPS Manufacturing Purchasing Managers’ Index showing a rise of 1.4 points to 54.9 in October really is good news. Most recent economic data – last week’s GDP figures, for instance – are best interpreted as the tail end of last year’s international recovery and the figures for possible sources of demand have been mostly depressing. Manufacturing has been a bit of a bright spot, however, and today’s figures move in a positive direction.
The PMI is based on a survey of purchasing managers, and a figure over 50 shows growth. Today’s figure is the first rise since May and the companies covered by the survey report increased export orders, a spurt of job creation and a build-up of stocks of raw materials – which probably indicate that companies expect demand for these materials to push up prices.
With consumer confidence low and government spending being cut, private sector investment and exports are vitally important if the recovery is not to peter out. It is hard to say whether international growth will continue strong enough to sustain this performance – the Markit/CIPS services PMI is due on Wednesday and this will provide an important check (these days services make up a much bigger share of the economy than manufacturing).
I’m very positive about these results, but they don’t allow us to predict that Britain is going to avoid falling back into recession, or even below-trend growth. And its important to note that they do not show the impact of the government’s policies: most cuts have not yet been implemented, so it’s far too early for any “crowding in” effect.