The UK manufacturing sector is starting to show the first signs of recovery, with both optimism and output levels at a seven-month high according to the latest edition of the Manufacturing Optimism Index issued by BDO Stoy Hayward LLP. The index rose again in May after reaching an historic low in March.
The optimism index is a measure of business confidence and a strong predictor of economic growth two quarters ahead. It is scaled such that 100 equates to trend annual GDP growth of 2.5%, 110 equates to the late 1980s boom, and 90 equates to the trough of the previous economic cycle in 1991.
The authoritative index registered as 87.4 in May, up from 86.4 in April. BDO Stoy Hayward judges this continuing rise to be extremely positive, given that the index reached a 12-year low mark of 79.4 in March.
Further bolstering this news of growing optimism was the fact that the index of output levels, calculated from order book strength and short-run turnover expectations, also increased for the second consecutive month, from 83.6 in April to 86.0 in May. This was the largest monthly increase since December 2007.
It’s still too early to call the bottom of the market, says Tom Lawton, head of manufacturing at BDO Stoy Hayward, an international public accounting firm, but these are certainly some positive results and could suggest that things are beginning to look up for the UK’s manufacturers.
Lawton notes that the manufacturing sector felt the effects of the credit crunch sooner than some other sectors, when their order books collapsed. However, he concludes, anecdotally, we’re now hearing that manufacturers are looking to restock and believe that they could be looking at the bottom of the cycle. |
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