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Spotlight on UK Manufacturing

The Institute of Supply Management (ISM) recently reported a strong finish for the manufacturing sector in 2017, a key contributor to the UK economy’s overall growth in the last quarter of 0.6%. The ISM Manufacturing Report On Business® is so highly respected because it is based on hard data, not conjecture. Members of the Institute’s Business Survey Committee, a group made up of more than 300 purchasing and supply executives from across the country, respond anonymously and confidentially to a monthly questionnaire about changes in production, new orders, new export orders, imports, employment, inventories, prices, lead times, and the timeliness of supplier deliveries in their companies comparing the current month to the previous month.

The questionnaire also asks for general remarks on business conditions. The responses of the committee members mirror the economic activities of the manufacturing sector, nationally, ensuring a report that accurately represents current business conditions.

The key findings in the 2017 report published in December were:

  • The report’s key metric, known as the PMI, was 59.7 (a reading of 50 or higher indicates growth) in December, which was 1.5% ahead of November’s 58.2. This marks the 16th straight month that the PMI has grown, with the overall economy growing for the 103rd consecutive month. The December PMI is 2.1% ahead of the 12-month average of 57.6.
  • New orders, which are commonly known as the engine that drives manufacturing, saw a 5.4% gain to 69.4, while growing for the 16th straight month. ISM said this stands as its highest reading going back to January 2004’s 70.6, with 15 of 18 manufacturing sectors reporting growth in December.
  • Production headed up 1.9% to 65.8 for its highest reading since hitting 66.5 in May 2010 while growing for the 16th straight month. Employment dipped 2.7% to 57.0 but still showed growth, albeit at a slower rate, for the 15th straight month.
  • ISM said that 16 of the 18 manufacturing industries reported growth in December, including: Machinery; Computer & Electronic Products; Paper Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Primary Metals; Nonmetallic Mineral Products; Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Furniture & Related Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; and Electrical Equipment, Appliances & Components.
  • The rate of job creation in the manufacturing sector rose at the fastest pace for 13 months
  • Comments from ISM member respondents included in the report were largely positive. One respondent from a fabricated metal products business said the “First quarter of 2018 will probably be better than the fourth quarter of 2017” suggesting further growth, backed up by a respondent in the transportation equipment sector who said “Domestic and international sales are on the rise.”

“The PMI hit the second highest level we have seen since February 2011, and the only higher number was the hurricane number, which was largely driven by supplier deliveries,” said Tim Fiore, chair of the ISM’s Manufacturing Business Survey Committee. “This is probably the purest and cleanest PMI we have seen in a long time. It was led by the new orders number, which hit a 14-year high, coupled with customer inventories (down 3.5% to 42.0) and backlog of orders (up 1.0% to 56.0) gaining, that means we are still not able to keep up with demand from a production standpoint.”

Amit Kara, Niesr’s head of UK macroeconomic forecasting, said “[economic growth] recovery has been driven by both the manufacturing and the service sectors, supported by the weaker pound and a buoyant global economy, while construction output continues to lag.”

The outlook for 2018 remains positive with ISM surveyors expecting those in the manufacturing industry to see a 5.1% increase in revenue in 2018 with growth occurring in 80% of manufacturing sectors. Just as encouraging are the expected 2.7% growth in capital expenditures and the prediction of increased capacity utilization from 82.5% to 85.8%.

If you’re looking for experienced talent to take your manufacturing business through the next phase of growth, talk to our specialist consultants today.

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