PMI data points to strong GDP growth in final quarter of 2013

Sunday, 05 January 2014 10:05

The UK’s manufacturing and construction sectors finished off 2013 by continuing to grow at healthy levels. 

The Markit/Cips purchasing manager's index (PMI) for the manufacturing sector showed a slight fall from November’s 33-month high of 58.1, down to 57.3 but still on course to contribute positively to the final quarter of 2013’s GDP figures.

Similarly, the construction sector’s PMI fell marginally from November’s 75-month high reading of 62.6, down to 62.1, helped by the fastest increase in commercial work since 2007. A figure above 50.0 indicates expansion.

Nationwide reported that house prices rose by the fastest pace for over four years in December, a further indication of potential growth for the construction sector.

However, lending figures from the Bank of England suggest that businesses are still struggling to secure funds from banks.

Although the data from the Bank showed mortgage lending to individuals went up, net lending to businesses fell at the fastest rate since records began in May 2011.

Business lending fell by £4.7bn and is almost 4 percent down on the year.

The Bank said the fall in business lending was concentrated around larger firms. Lending to small businesses rose by £140million.  

Although the manufacturing sector only accounts for around 10 per cent of the overall UK economy, the ninth straight month of growth, coupled with the strong performance in the construction sector and the high levels of growth seen in the vital services sector has helped the UK economy confound expectations and is likely to grow by two percent over the course of 2013, double most economists predictions at the start of the year.

Howard Archer, Chief UK Economist at IHS Global said: “The manufacturing index averaged 57.3 in the fourth quarter of 2013, which was up from 56.2 in the third quarter and was the best quarterly average since the first quarter of 2011.”

Manufacturing new orders grew for the 10th consecutive month and respondents expect the growth momentum to continue into 2014. The rate of jobs growth was the second highest seen in the past 30 months and output grew for the ninth consecutive month.

UK exporters saw a rise in demand for their products from China, Brazil, USA and Ireland. However, overall output in the manufacturing sector is still nine per cent below pre-credit crunch levels.

Rob Dobson, Senior Economist at Markit, said: “UK manufacturing’s strong upsurge continued at the end of 2013, with rates of growth in production and new orders still among the highest in the 22-year PMI survey history.

“On its current track, the sector should achieve output growth of over 1% in the final quarter while filling around 10-15 thousand jobs, continuing its positive contributions to both the broader economic and labour market recoveries.”

Meanwhile, the construction sector which accounts for 6.3 per cent of the UK economy continued its excellent performance with a strong performance in the final month of the year, the eighth consecutive month of output growth in the sector.

Strong output rises were recorded in all three areas of the sector with sharp increases in output, new orders and employment in December.

The outlook for 2014 is bright with 57 per cent of respondents expecting to see expansion in 2014 against just 10 per cent expecting to see a fall in business.

Tim  Moore, Senior Economist at Markit said: “The latest survey highlights that construction companies enter 2014 with the wind in their sails.

“Over half of all survey respondents anticipate increased output levels during the course of 2014.

“Stronger growth expectations and fuller order books are continuing to fuel job creation in the construction sector.”


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