Growth Delusions

The Times reports today that:
'recent PMI  figures have been much more upbeat that the underlying data being released by the Office for National Statistics.
The headline PMI figure for March suggests that activity at British factories is growing faster than in China, where the headline reading was 57. The index of output is 61.9 in the UK and a more modest 58.1 in China.
As Colin Ellis, European economist at Daiwa Capital Markets, puts it: "Today's data reveal that output in the UK manufacturing sector rose at a faster pace than in China last month. To be blunt, anyone who seriously believes this needs their head examined."'

 So let us examine our heads; manipulated figures? Apart from that unlikely hypothesis, there could be two factors:

an increase in the share of imported inputs, in place of in-factory production of components and parts.

or, even without an increase in the share of imported inputs, the reported rise in import prices being due to a weaker pound.

The second is a certainty; the first is a plausible conjecture that fits into the perception of British industry turning into the pure assembly of foreign components.

A result of globalisation is division of labour not only across the spectrum of final products, but across all stages in the production of every product.  For instance, the capital intensive research and development stage in Germany or the United States, the labour intensive processes in India, low-wage qualified labour at the assembly stage in the UK,  and so on.

This perspective turns current figures on British manufacturing growth into an optical illusion.