-Manuf Unlikely To Help Prevent Slide Back Into Q4 Contraction
-Still No Trend Towards Rebalancing Seen; Domestic Market Still Weak

LONDON (MNI) – The latest Markit/CIPS purchasing managers’
manufacturing sector survey showed the sector showing some signs of
stabilising, with the headline activity index coming in at 49.1 – well
above the median analyst forecast of 48.0.

The November outturn marked a clear improvement from October’s
three-month low of 47.3. But Markit pointed out that November marked the
seventh straight month that the headline reading had been below the
neutral 50.0 level.

But production actually rose for the first time in five months,
although this was driven by a stabilising trend in new orders and a
sharp reduction in backlogs of work.

In fact, outstanding business fell at one of the fastest rates seen
since the current period of decline started in February 2011.

Markit said that demand from the domestic market remained subdued,
while the level of new export orders continued to deteriorate. Companies
reported weaker inflows of new business from clients operating in Europe
and the US. The rate of new export orders fell to its weakest since
August. One-in-five exporting manufacturers reported a decrease in new
orders from overseas.

A continuing cost-cautious approach to hiring, purchasing and stock
holding was noted by Markit. Job losses were reported for the fourth
month running, with the rate of reduction accelerating slightly since

Purchasing activity was scaled back for the eighth straight month,
leading to a further substantial reduction in pre-production stocks,
Markit said.

Rob Dobson, Senior Economist at survey compilers Markit, said that
the sector was “merely stabilising” and suggested that “the economy is
still showing no signs of rebalancing towards goods production and

“…Manufacturing is unlikely to help prevent a possible slide back
into contraction in the fourth quarter,” Dobson added.

“Subdued domestic market conditions and declining export orders
mean producers remain focused on keeping costs as low as possible.
Employment, purchasing and stocks are all therefore continuing to be
cut, which is likely to drag on the wider economy in the coming months.

“The renewed recession in the eurozone and sluggish growth further
afield clearly remain big worries for UK producers, hitting exports.
However, at the same time, demand in home markets remains frustratingly
weak. Destocking and cut-backs in business expansion plans have hit
sales of intermediate and investment goods to domestic customers.

“On a brighter note, producers of consumer goods indicated that
business is holding up well, with output growth surging to a near
two-year high. Such growth divergences add to the sense that the UK
economy remains overly oriented towards consumption.”

–London newsroom 0044 207 862 7492; email: dthomas@marketnews.com