POLL-UK factory activity at 2-yr high, new orders surge

inspector_monkfish

09:28 02Nov09 UK MANUFACTURING PMI 53.7 IN OCT VS REVD 49.9 IN SEPT (FCAST 50.0)-CIPS/MARKIT
09:28 02Nov09 UK MANUFACTURING NEW ORDERS INDEX 59.5 IN OCT VS 52.7, HIGHEST SINCE JAN 2004
09:28 02Nov09 POLL-UK factory activity at 2-yr high, new orders surge

LONDON, Nov 2 - British manufacturing activity grew at its fastest rate in two years in October as new orders rose at their fastest in almost 6 years and firms started rebuilding their stocks, a survey showed on Monday.

The CIPS/Markit purchasing managers index of manufacturing activity rose to 53.7 in October from an upwardly revised 49.9 in September, signalling the fastest pace of growth since November 2007 and beating forecasts for a rise to 50.0.

The improvement was driven by a surge in new orders, with the index for this measure jumping 6.8 points on the month to 59.5, the highest since January 2004, when it was 61.5.

"The latest data are well above the market consensus," said Rob Dobson, senior economist at Markit.

"Looking ahead, the combination of rising new orders, lean inventories, high orders-inventory ratio and weak sterling all suggest that the sector should continue its recovery."

The figures suggest Britain's economy made a strong start to the final quarter of this year, having suffered its longest recession on record, and may reassure Bank of England policymakers their measures to stimulate growth are working.

The central bank will decide on Thursday whether to extend its 175 billion pound quantititative easing programme aimed at boosting the economy. Monday's data could persuade policymakers to call a pause for now.

However, two-thirds of economists in a Reuters poll reckon the central bank will top up the scheme and that last month's official data showing the economy unexpectedly shrank in the third quarter will encourage them to inject more stimulus.

DESTOCKING NEARING END

Monday's survey suggested that a long period of destocking may be nearing an end, which should pave the way for firms to ramp up production if demand holds up. This would give a boost to the economy, although manufacturing only accounts for 13 percent of Britain's economic output.

Manufacturing output grew at its fastest pace since November 2007, with consumer and intermediate goods manufacturers continuing to enjoy growth, while investment goods firms reported declines.

"Companies indicated that higher levels of new business encouraged the restart of some production lines," Markit said.

"There were also reports of market conditions starting to improve, despite remaining tough overall, and clients moving closer to restocking following a sustained period of inventory depletion."

It said the domestic market was the main source of demand for new orders, but the weak pound continued to support exports.

Sterling has lost more than a quarter of its value against other currencies on a trade-weighted basis since the onset of the credit crunch two years ago, a development that BoE policymakers have said should help rebalance the economy.

But despite the improvement in demand recorded in October's survey, firms were unable to pass on higher raw materials costs to their customers.

The input prices index rose to its highest in 13 months, with the weak pound also a factor in higher raw materials costs, Markit said.

The output prices index, meanwhile, rose only modestly to stand just below the 50-level that separates contraction from expansion.

Companies cut staff for an 18th consecutive month in October, albeit at the slowest pace since June 2008.

Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.

kennyboy66_2

Hurray !

lemonjelly

Interesting news. Sounds like UK plc is about to start producing stuff again...

chucky

it's just green shoots - it won't last

skap7309

Hmm, and there is the manufacturing company i work for just announcing a voluntary redundancy program.....

kennyboy66_2

skap7309 wrote: »

Hmm, and there is the manufacturing company i work for just announcing a voluntary redundancy program.....

Perhaps its all those employees skiving on the internet...........

munkiemunkie81

For us many orders have been on hold because quite rightly companies wanted their work doing at the cheapest cost possible, now the work needs doing urgently and having screwed the manufacturing companies down to the bare bones they are placing the orders.
The orders may be flocking in but the fight for them is tough. Many companies making very very little profit (if any at all) in order to win the contracts just to keep their staff in wages, some will be making very risky decisions and the redundacies for them will be looming.
I'm not sure the margins will rise any time soon.

halight

Im Waiting to see what the old lady has planned on thursday.
We get bits and bobs of good news coming out all the time now but to even it all up bad news still pops up from time to time.

Mr Monkfish do you think that the BOE will start chargeing banks that have money on deposit with them from this thursday?
Looks like its going that way.

Bit more QE yet another 25bn to start before xmas.


I did not think that thay would do think untill the new year but with another 3rd quarter drop in GDP i feel that it may well happen now.

Generali

QE is great for now but it may be harder to keep going if other coutries keep their annoying habit of havnig improving economic situations and thus putting their interest rates up.

FWIW, the RBA look very likely to put rates up by another 25bps tomorrow (not 50).

Alcopop is my pick for the Melbourne Cup tomorrow.

tomterm8

inspector_monkfish wrote: »

09:28 02Nov09 UK
09:28 02Nov09 UK MANUFACTURING NEW ORDERS INDEX 59.5 IN OCT VS 52.7, HIGHEST SINCE JAN 2004
.

Um, can someone check whether that stuff about new orders index being highest since 2004 is right? If that's true, it's been a pretty crap last 5 years.

kennyboy66_2

Generali wrote: »

QE is great for now but it may be harder to keep going if other coutries keep their annoying habit of havnig improving economic situations and thus putting their interest rates up.

FWIW, the RBA look very likely to put rates up by another 25bps tomorrow (not 50).

Alcopop is my pick for the Melbourne Cup tomorrow.

But surely QE would not be required quite as much, as you would expect other countries currencies to strengthen, making UK exports more competitive AND reducing UK deflationary pressures.

Of course there is a limit to how far it is desirable for the pound to fall.

Mourilyan for me in the Cup.

I'm defending a proud record of 2 bets and 2 winners in this race.
Kingston Rule in 1990 (illegal bookie laid me $20 @ 12/1 on the site I was working at Moomba) and Makabye Diva a few years ago in the last of her wins.