-EEF: Respondents Did Not Report Plunge In Activity in May

LONDON (MNI) – Output and new orders in the engineering, and
broader manufacturing, sectors nudged higher in the second quarter,
according to an EEF survey, with respondents contradicting the findings
of last week’s headline grabbing purchasing managers report that
activity plunged in May.

The May purchasing managers (CIPS) manufacturing survey found
activity nose-dived, fueling speculation the Bank of England’s Monetary
Policy Committee would have to provide further stimulus, but EEF chief
economist Lee Hopley said the companies they had talked to in recent
weeks reported no such collapse in activity.

The EEF’s Q2 total engineering output balance rose to 20 from 19 in
Q1 while the total new orders balance rose to 17 from 13, with export
new orders up at 11 from 7. In the broader manufacturing sector the
total output balance was 18 in Q2 with the Q3 expected output balance
dipping to 14.

The EEF, formerly the Engineering Employers’ Federation, has a long
run of quarterly backdata on the engineering sector rather than the
broader manufacturing sector but it now surveys both.

The May manufacturing PMI survey showed the second fastest monthly
fall in activity in its history but asked about this reported collapse
in activity Hopley said “We are not hearing about it.”

The EEF survey was carried out in May and Hopley said they had
talked to a wide range of companies in recent weeks and for the sector
as a whole “on balance their order books are up.”

The balance of total new orders in the manufacturing sector for Q2
was 14, rising to a predicted 17 in Q3.

The EEF is, nevertheless, predicting broadly flat quarterly
manufacturing output in the first half of this year, with growth in the
second half and a small contraction, of 0.1%, for the calendar year as a
whole.

Hopley said this prediction reflected the flat outturn in the
official manufacturing data in the first quarter and the fact some
sectors, such as autos, would perform better in the second half.

The best performers in the manufacturing sector in the second
quarter were – as expected – the transport and mechanical equipment
sectors. In the transport sector, aerospace outdid the rest.

Hopley says the EEF survey overall contained “reasons for cautious
optimism” if recent trends continue into coming quarters.

Companies said they are willing to invest, despite speculation
about the Euro crisis’ end being just that – speculative.

-London newsroom: 4420 7862 7491; email: sarah.mewes@ntkn.com
drobinson@marketnews.com

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