Food and drink manufacturers buck the trend
The Markit PMI (Purchasing Managers' Index) survey, which benchmarks indicators to measure economic conditions, showed that of eight manufacturing sectors, only food and drink experienced growth. PMI surveys are monitored by the Bank of England and discussed at the monthly Monetary Policy Committee meetings.
Bright light
The growth was attributed to the strength of food and drink exports, which Markit described as “the one bright light” in an otherwise gloomy climate.
“Food and drink exports are still faring well, suggesting the home market is weak,” the organisation’s chief economist Chris Williamson told FoodManufacture.co.uk.
Figures from the Food and Drink Federation (FDF) also indicate that exports are the major driver of growth for food and drink manufacturers. It reports that food and non-alcoholic drink exports grew to £5.8bn in the first half of 2011 – a rise of over 13% on the same period of last year.
While the sector is still growing, Markit said that the rate of growth is considerably weaker than it was at the beginning of the year.
“Even in food and drink, the rate of growth has fallen sharply since the beginning of the year, when there was a very robust pace of growth. October has been the third weakest month the sector has seen since 2009,” said Williamson.
Confidence shaken
Terry Jones, FDF’s director of communications, admitted that food and drink manufacturers may have had their confidence shaken by commodity price volatility. Inflation continues to affect business optimism and restrict investment opportunities while rising commodity and overhead costs continue to make food manufacturers cautious, he said.
Small to medium-sized enterprises particular, he said, have felt under pressure.
But prospects for the sector are reasonably good, added Jones.
“While the current business environment remains challenging and the findings from the CBI’s recent Industrial Trends survey do suggest concern within the wider manufacturing industry, the food and drink sector’s track record demonstrates a sector that has proven largely resilient and capable of growth in adverse conditions,” he said.
“We expect exports to continue to increase. Investment levels have improved so far in 2011 compared with 2010 and are forecast to be higher in Q3 [the third-quarter] 2011 due to greater projected spending on R&D and upskilling.”
