UK Manufacturing Thrives As Production And New Order Growth Hits Highest Level In 19 Years; Euro Zone Recovery Stays On Track

 @AmruthaGayathri on December 02 2013 5:54 AM
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An engineer work on the engine of a Bristol Blenheim aeroplane at the Aircraft Restoration Company in Duxford, southern England on Sept. 18, 2013. Reuters

Production and new order growth in the UK’s manufacturing sector in November hit its highest level in 19 years, boosting the pace of job creation to its fastest rate since May 2011, while the 17-member euro zone confirmed that its factory activity is well on the road to recovery as indicated by a preliminary reading, data released on Monday by Markit showed.

The UK’s manufacturing sector, which has been solidly expanding for several months, gained further momentum to hit a PMI reading of 58.4 in November from 56.5 in October, beating a consensus figure of 56, driven by sharp increases in both output and new orders.

“Sustaining the recovery remains the key and the news here is also positive,” Rob Dobson, a senior economist at Markit, said in a statement. “The manufacturing expansion remains broad-based by sector, demand from the domestic market continues to surge higher and new export orders are rising at a clip close to October’s 32-month high.”

Meanwhile, the euro zone's manufacturing PMI rose to 51.6 in November, up from a flash estimate of 51.5 and October’s 51.3 reading. Output, new orders and new exports grew for the fifth straight month, but the euro zone failed to halt its job-shedding trend in manufacturing.

“Overall, manufacturing across the region is enjoying its best performance for two-and-a-half years, but the pace of growth remains only modest,” Chris Williamson, chief economist at Markit, said in a statement.

Germany’s manufacturing PMI hit a 29-month high of 52.7 in November, revised up from a flash reading of 52.5 and higher than 51.7 recorded in October. French factory activity contracted, slipping to a five-month low of 48.4, compared to 47.8 recorded in a preliminary reading and lower than 49.1 in October.

“The most promising recovery signs are largely confined to northern countries, with strong growth being recorded in Germany, the Netherlands and Austria. More southerly countries continue to disappoint, though, especially France and Spain, where renewed downturns are evident,” Williamson said.

Although the UK has been leading gains in Europe, the “survey was not all good news,” for the country, Samuel Tombs, UK economist at Capital Economics, said in a note. A reading above 50 indicates expansion while one below that number signals conrtaction.

“The rise in the output prices balance to its highest level in over two years suggests that the manufacturing recovery is generating price pressures. And the pick-up in the employment balance from 51.9 to 54.5 to a two-and-a-half year high, though good news for job prospects, suggests that productivity in the manufacturing sector is recovering only slowly,” Tombs said.

Monday’s PMI data “provides a small challenge to the MPC’s view that inflation will remain very low and unemployment will take a long time to fall to its 7% threshold,” he added.

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