Mixed evidence of the sector’s travails came this morning as the Engineering Employers Federation’s second-quarter business trends survey showed a further slump in output over the past three months. That came, however, as the manufacturing purchasing managers survey came in stronger than expected. The runes are mixed.
On the plus side, falls in manufacturing orders and employment steadied in the EEF survey (they would hopefully have had to after the sharp declines seen already).
But the key output balance fell to minus 52 from minus 39 in Q1. That is the lowest since comparable records began in 1995.
Perhaps the best news the EEF had was that the inventory cycle in areas like automotive and metals has virtually reached the bottom.
Destocking is a key element in pushing the manufacturing industry into a dive.
While the pace of any pick-up in inventory levels is impossible to guess, you at least have got to have hit the bottom before any sort of recovery is possible.
The sector is also likely to be helped by relatively dormant inflation, which should allow the Bank of England to keep interest rates at their historic lows.
That should help Britain’s exporters even if it canes Brits taking foreign holidays.
There have also been some signs that the new scrappage scheme in the car industry is working, with people trading in old bangers in order to get a discount on new cars.
But we ae talking about an easing of the car industry’s woes here, not any vaulting recovery by a sector whose suspension looks very dodgy indeed given people’s financial and unemployment worries.
The balance of probabilities, however, remains that the manufacturing sector is likely going to have to write off the whole of 2009 even with the better sentiment in the industry seen since the beginning of the year.
But on the wider prospects for the UK economy we have to put even the occasional better news _ such as this morning's purchasing managers survery _ for the sector into perspective.
Bluntly, it is less crucial for the economy any more. Manufacturing contributes just 14 per cent of GDP compared with 25 per cent in the late 1980s.
And one in 10 of us is now employed in manufacturing. That smoke-stacks up against more than one in four employed in the sector in the late 1970s before the Thatcherite shakeout.
