Strong manufacturing output bolstering UK economic outlook

Data released by the Office for National Statistics (ONS) showed that UK production output was 3.0 percent higher in April compared to the same month in 2013. Results were especially strong in the manufacturing sector, where output was up 4.4 percent over the same period – the fastest year-on-year growth since February 2011.

Growth was broad based, with output in all sectors except for electricity, gas, steam and air conditioning, higher than they were a year ago. This is partly due to an unusually warm April, reducing demand for heating and energy within the sector.

Within manufacturing, the main components contributing to strong output growth were the manufacture of rubber, plastic and other non-metallic products, increasing year-on-year by 18.0 percent – the largest rise for over 40 years. Other substantial contributions came from the manufacture of transport equipment, food products, and beverages and tobacco.

Looking forward, leading indicators such as the Markit/CIPS Purchasing Managers’ Index (PMI) for manufacturing suggest that growth in the sector continues to be robust. Although the index score for April was slightly higher than the 57.0 for May, it is still comfortably above the 50 mark that denotes growth. In addition the ICAEW/Grant Thorton Business Confidence Monitor, shows confidence in the production industries for the year ahead is on a strong upward trend, suggesting that growth will continue.

These results are encouraging for the production industry, which only relatively recently (mid 2013) returned to positive year-on-year growth. Output in the sector remains 11.3 percent below the Q1 2008 pre-downturn peek so there remains a way to go. However, with strong growth now emerging, the sector is expected to help boost UK Gross Domestic Product growth to 3.0 percent for 2014 as a whole.