Manufacturing Industry On The Slow Road To Economic Recovery

Last Updated on Monday 29th Jun 2015

The past two years have not been too good for the manufacturing industry. Manufacturing output has been dragging. In the first quarter of 2013, there was a boost of 0.3 percent in the economy. The output pace began increasing in May because of the growing demand for domestic goods in the UK and overseas. But, the step that the manufacturing industry took on the road to economic recovery became evident in June when manufacturing units showed best performance.

According to a report that was published in June, there has been a significant cut in prices and an increase in internet shopping, thereby helping retailers show a marked increase in sales. The sales increase in May and June gave rise to the hope that British economy is finally on the road to recovery and things will take a turn for the better. James Knightley, an ING group economist, felt the same when asked for his views in June 2013.

The manager’s index showed an increased growth from 50.2 in April to 51.3 in May. According to this index, anything, which exceeds 50, indicates growth. This led to a hope that the manufacturing sector will show an increase in output in the forthcoming months. There was optimism all around, especially in the manufacturing sector. The battered Manufacturing industry that has been limping along for the past two years is building a new foundation. There is a lot of work to be done but it is hoped that the strong foundation will be good for the future.

The increased output since May is also an indication that the recession that has been dogging the steps of the manufacturing industry is perhaps at an end. Sales were strong in the month of May and June. While a major part of the British population spent May holidays dressing up homes with furniture, women also helped boost the sales with purchase of sandals and beauty products. Of course, there was a heavy discount but the sales rose nonetheless. The increase was 1.8% more than the sales in May 2012.

At the end of the year 2013, there was production expansion in the manufacturing industry with increased orders. The recovery that began in May continued in December. Manufacturers reported growth in businesses because of the new orders and efforts were made to clear any backlogs.

The index in November 2013 showed 58.1 but fell down again in December 2013 with 57.3. According to these figures, there is a growth of 1 percent in the manufacturing sector during the last quarter of the year 2013. The average, which is 57.2, is the highest in the last three years.

Another interesting factor to observe is the rise in employment in the manufacturing sector. As output increased, there was an increase in employment also. News jobs were created, creating a record of sorts.

The increase in the strength of the domestic economy and the new orders of exports has brought about this change. Although the increase in December was slightly low, it was nevertheless quite high if compared with the performance of the manufacturing industry in the past three years. There were new demands from countries such as Ireland, Brazil, USA, Russia and China.

Both output charges and input costs increased in December 2013. As a result, there was inflation in purchase price, which was pushed due to the increase in costs of energy, commodities, packaging, paper, timber and polymers. In some cases, the price hike was due to the supplier increasing the prices, as there was a rise in the demand of raw material. Suppliers were taking advantage of shortage of some materials and increasing the prices. Also, it is believed that the price increase was a response to the increased demand.

The question is – with the pre-crisis peak production 9 percent less, will the manufacturing industry continue with the recovery? The growth that is expected in 2014 should help. Despite the slowed expansion in December 2013, there is still hope of increase in expansion in the New Year.

A lot depends on the consumer and their spending in the quarter. There is a slight concern with the rise in input price because of the shortage of raw materials. But if you view the larger picture, you can see that the economy of UK manufacturing industry has taken a turn for the better.