Green shoots recede in spring
7 Jul 2009
The decline include a 2.7% drop in output from the mining and quarrying sector and a 5.5% fall in the energy supply sector. Within energy supply, output of the electricity supply industry decreased by 5.4% during the period, while the mining and quarrying industry recorded a 2.3% decrease in oil and gas extraction, said the ONS.
Manufacturing output decreased by 1.2% in the three months to May 2009 compared with the three months to February 2009 and was 13.1% lower against the same three-month period a year ago. Output decreased in nine out of the 13 sub-sectors and increased in four sub-sectors.
Within the decreases in output in the three-month period, the most significant were 4.6% in the basic metals and metal products industries, 5.0% in the machinery and equipment industries and 3.2% in the transport equipment industries. This trend was partly offset by increases of 2.2% in the chemicals and man-made fibres industries, 1.4% in the paper, printing and publishing industries and 1.1% in the food, drink and tobacco industries.
Between April and May, manufacturing output decreased by 0.5%, said ONS. Output, it added, decreased in eight of the 13 sub-sectors and increased in five sub-sectors during the latest month. The most significant decreases in output were 2.0% in the paper, printing and publishing industries and 1.7% in the machinery and equipment industries.
Comenting on the ONS data, Tom Lawton, head of manufacturing, at BDO Stoy Hayward, said he was disappointed to see an overall fall in manufacturing output over the last three months, particularly after seeing positive signs in April’s results. Given the volatility of the sector and the economy, he urges manufacturers to maintain a strong focus on cost control.
“With a 0.5% month-on-month fall, manufacturers still need to exercise caution as a number of factors continue to impact recovery. Bank lending and credit insurance are two of the biggest issues facing manufacturers and are clearly impacting on short term recovery in the sector. Companies continue to report that they are not yet seeing the benefit of government funding initiatives,” said Lawton.
“Despite a recessionary backdrop and difficult market conditions, we are hopeful that there will be light at the end of the tunnel and anecdotally we are hearing from a number of clients that they feel they have reached the bottom of the curve within their business - even if they are not yet on an upward curve," he added.
According to the BDO executive, the ONS results are in contrast with BDO’s own manufacturing output index, which shows that confidence has been on the increase for the last two months.
“There are clearly several hurdles to negotiate in the road to recovery, but we are hopeful that some sectors within manufacturing will see an upturn in the near future. But it is likely that the sector as a whole will continue to be weighed down with the huge difficulties facing the automotive sub sector.”
“Manufacturers that have gone overseas in recent years with an eye on both the market opportunities as well as low cost sourcing opportunities appear to be more well placed to survive the short term and perhaps prosper in the long term. Companies that have moved to take advantage of lower costs may have a more difficult calculation. The cost advantage still holds but other factors suggest that some production may be best done nearer to home.”
