Weak productivity casts shadow over manufacturing upturn

Manufacturing grew at its sharpest pace in eight months in March, figures yesterday showed, but separate data flagging a decline in UK productivity could raise fresh concerns about the sustainability of the wider recovery.

The sector posted a reading of 54.4 on the closely-watched Cips/Markit purchasing managers’ index (PMI) survey – where 50 separates growth from contraction. It was up from 54 in February.

It is the latest economic boost in the run-up to the general election after revised official data on Tuesday showed the UK had grown more strongly than previously thought.

But figures from the Office for National Statistics (ONS) published yesterday are likely to add to worries about the pace of the recovery, as an improvement in UK productivity failed to materialise.

It fell by 0.2 per cent in the fourth quarter of 2014 and is slightly lower than pre-economic crisis levels in 2007, the ONS said.

The manufacturing PMI pointed to a reading of 53.8 for the first quarter as a whole, the best since the second quarter of last year, while jobs in the sector are being created at the rate of about 5,000 a month.

Figures showed new export orders enjoying their fastest growth in seven months following a slight dip in February, with improved demand from Canada, China, Germany, the Middle East, the Netherlands and the US.

The sector’s upturn, which was led by consumer goods, saw employment grow for the 23rd consecutive month.

Howard Archer, chief UK and European economist at IHS Global Insight, said: “The outlook for manufacturers seems pretty healthy on the domestic front, especially for consumer goods.”

“On the export front, manufacturers will be fervently hoping that the eurozone can build on signs of improving growth.”

Shadow business secretary Chuka Umunna said of the productivity data: “This is yet another illustration of an economy which simply isn’t working for working people.”