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BUSS4 UK manufacturing

Penny Brooks

1st October 2014

As BUSS4 students start on their research into UK manufacturing, one piece of data that they should keep an eye on is the CIPS Purchasing Managers Index. This is produced monthly by the Chartered Institute of Purchasing and Supply by surveying managers responsible for purchasing materials in manufacturing industries, and so it gives an indication of the level of activity. A reading above 50 (shown by the red line on the graph above) shows growth in activity, below 50 shows a decline.

The latest data for the index was released yesterday. At 51.6, it is still above 50 and so showing growth, but it has declined since August (52.5), which was in itself lower than the figure in July. It is now at the lowest point since February 2013, and still well below the pre-recession level in 2008.

The main reason for sluggish growth in manufacturing output is the difficulty of exporting to the Eurozone, which takes over 50% of all UK exports. As the decline in Europe hits demand there, there is less demand for imports from the UK, and so less need to produce goods here. There has been some pick up in demand from North America and the Middle East, though, and employment in manufacturing industry has actually risen in the last month, suggesting that producers are optimistic enough about prospects to take on more workers.

The PMI survey is widely reported - these items on the BBC website and in The Independent make a good introduction for students to consider.

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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