Manufacturing sector remains "leading light" of British economy

Source: Xinhua| 2017-12-02 01:49:51|Editor: Mu Xuequan
Video PlayerClose

LONDON, Dec. 1 (Xinhua) -- The British manufacturing sector continued its recent trend as the "leading light of the economy" with strong growth in November.

The manufacturing sector purchasing managers' index (PMI) for November released on Friday increased to a 51-month high of 58.2 in November from 56.6 in October and 56.3 in September.

The November/October average of 57.4 is well above the third quarter average of 56.2 and substantially above the 50 level that indicates unchanged activity.

"It was a very encouraging survey all round. The manufacturing sector is still in the sweet spot and is the leading light in the UK economy," Dr Howard Archer, chief economic adviser to the EY ITEM Club in London told Xinhua on Friday afternoon.

Output, new orders and employment all increased at a faster rate and investment goods new orders increase at the steepest pace since August 1994.

"Orders were at a four-year high, but it was surprising to see a strong pick-up in orders for investment goods which were at the strongest level since 1994, that was encouraging," said Archer.

"Surprising too given that surveys show that companies are being cautious in their investment because of uncertainties over Brexit and over lackluster UK growth."

Brexit uncertainties have been reported as hanging over investment decisions by firms based in Britain, with companies unwilling to commit to new projects or invest in better plant while the nature of Brexit remains unknown.

Despite these good investment figures, Brexit may still come to weigh heavy on decision makers.

Archer said: "It is questionable whether investment goods can sustain that strength."

Archer said that manufacturing PMIs have been generally strong in developed economies globally, for instance the Eurozone, Japan that across the world the sector was "doing well -- that helps the UK".

These manufacturing figures are in line with continued modest economic growth of about 0.4 percent for the fourth quarter, the same as growth in the third quarter.

While manufacturers are benefiting from weak sterling, down from 1.48 U.S. dollars at the time of the Brexit vote last year to 1.34 U.S. dollars now, to gain higher export volumes, they are also seeing increased costs from raw materials and in supply chains.

However, the survey indicates that some manufacturers are altering their supply chains because of sterling weakness.

"There are signs that British manufacturers, because of the weakness of the pound, have been switching of supply chains to domestic suppliers," said Archer.