Promising purchasing

Confidence in the recovery of the economy has been lifted slightly, as the CIPS/Markit Purchasing Managers’ Index (PMI) for manufacturing posted 50.8 in July.

The survey, based on data for new orders, production, employment, suppliers' delivery times and stocks of purchases, shows an increase from June’s figure of 47.4 and is the first time the index has risen above 50 since March 2008. According to CIPS, a figure above 50 signals growth.

Although high levels of job losses continued, the rate of decline is said to have slowed. There were gains in output and new orders, although CIPS said the recession has substantially reduced the size of the manufacturing sector.

‘The manufacturing sector has clearly pulled out of the nosedive it was in earlier this year and is no longer plummeting,’ said David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply.

‘Firms continued to slash inventories so severely that the downturn has been much deeper than might have been expected. However, output and new orders are both now rising as firms need to order new stock to meet sales.

‘While this is positive news, the manufacturing sector is still far from healthy and smaller firms continue to bear the brunt. News of the government's £150m cash injection, although welcome, will only benefit advanced manufacturing.

'We may have to accept that the face of British manufacturing has changed forever and the sector will stabilise at a much-reduced size than before the recession. If this is the case then employment levels may never return to what they once were,’ he added.