Manufacturing Picks Up

In a similar way to employment, manufacturing output is a lagging indicator of economic recovery. Manufacturers want to feel confident that they have customers for their output such that they are not left with expensive inventory on their shelves. This means that manufacturing output increases in response to demand i.e. improved consumer confidence.

Manufacturing in the USA experienced an unexpected decline in May but has recovered for June. The Institute for Supply Management of national factory activity recovered from the May figure of 49 to stand at 50.9 last month – a value above 50 indicates growth. New orders rose from 48.8 to 51.9.

In Europe, manufacturing has yet to return to growth within the Eurozone as a whole, but at least the rate at which it has been contracting has eased. The most recent Purchasing Managers’ Index climbed to 48.8 which is the Eurozone’s best figure for 16 months. The Spanish figure for June was the best for two years and came in at 50, up from 48.1 in May.

Eurozone unemployment hit 12.1% of the workforce in May; the worst level of unemployment in the bloc’s history.

The UK manufacturing sector returned a June PMI figure of 52.1 indicating its best level for two years. UK business confidence is at a six-year high according to the most recent (June) quarterly survey conducted by the British Chambers of Commerce (BCC). BCC has suggested that the UK economy could grow by more than expected (which would hardly be a major challenge) and is expecting the Q3 GDP figure to come in at 0.6%. In earlier predictions, BCC had suggested that full-year growth would come in at 0.9% so their Q3 prediction marks a sharp increase.