UK manufacturing hits 30 month high

UK manufacturing hits 30 month high

The UK manufacturing sector ended 2016 on a positive note with the rate of new orders in December among the best seen over the past two-and-a-half years.

British manufacturers benefited from stronger inflows of new work from both domestic and overseas clients during December, boosted majorly by the weakening pound.

The seasonally adjusted Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to a 30-month high of 56.1 in December, up from 53.6 in November and well above its long-run average (51.5).

December also saw new export business rise for the seventh successive month. Furthermore, the rate of growth was the second-highest since early - 2014, bettered only by that signalled in September 2016.

Companies reported increased levels of new work from the USA, Europe, China, Middle East, India and other Asian markets. Improved inflows of new business led to a slight increase in backlogs of work in December, the first rise since February 2014.

Rob Dobson, senior economist at IHS Markit, which compiles the survey, said: “The UK manufacturing sector starts 2017 on a strong footing.

"The headline PMI hit a two-and-ahalf year high in December, with rates of expansion in output and new orders among the fastest seen during the survey’s 25-year history.

“Based on its historical relationship against official manufacturing output data, the survey is signalling a quarterly pace of growth approaching 1.5%, a surprisingly robust pace given the lacklustre start to the year and the uncertainty surrounding the EU referendum.

“The boost to competitiveness from the weak exchange rate has undoubtedly been a key driver of the recent turnaround, while the domestic market has remained a strong contributor to new business wins.

"A plus point from the December survey was that the expansion was led by the investment and intermediate goods sectors, suggesting capital spending and corporate demand took the reins from the consumer in driving industrial growth forward.

“On the prices front, higher input costs continued to feed through to increased selling prices, with rates of inflation remaining among the highest seen during the survey history.

"Of the companies citing a cause of higher costs, 75% linked the increase to the exchange rate.”