UK boosted by overseas orders

Briatin’s manufacturers enjoyed a new year jump in orders as demand from overseas rose at its fastest pace for three years, reports The Guardian.

The first gauge of activity in the sector for 2014 suggested jobs growth continued in January but the rapid recovery in overall factory activity eased off.

The headline reading on the Markit/CIPS UK Manufacturing purchasing managers’ index eased to 56.7 in January from a downwardly revised 57.2 in December.

That was lower than the consensus forecast for 57.0 in a Reuters poll of economists but well above the 50-mark that separates expansion from contraction.

Economists said the sector, which accounts for around a tenth of the UK economy, was still showing solid growth.

“UK manufacturing made a strong start to the new year, continuing the robust upsurge in production seen at the tail end of 2013,” said Rob Dobson, senior economist at survey compilers Markit.

“Although the pace of output expansion has cooled slightly an recent months, growth is still tracking at one of the highest rates in the 22-year survey history.”

The report showed output growth eased with that index slipping to 59.4 from 60.4 in December. But reports of rising orders pointed to more strength ahead for factories. Growth in new export orders was at a three-year high with manufacturers citing improved demand from North America, mainland Europe, Asia, Brazil, Scandinavia and the Middle East.

The stronger demand helped manufacturers pass on some of their rising costs with “a further solid increase in average selling prices”, according to the report.

Markit said responses from manufacturers about what was in demand in January also signalled the long-awaited recovery in business investment may be quietly beginning.

“Recent months have seen the largest surge in demand for UK investment goods for two decades,” said Dobson.

Signs of a pick-up in export demand and investment will be welcomed by the Treasury as it continues to push for a rebalancing in the UK economy away from reliance on domestic, consumer demand.

But the sector still has a long way to go to recover ground lost during and after the downturn. The manufacturers’ organisation welcome Monday’s report but warned the recovery was by no means assured.

“With separate data showing a further improvement in manufacturing activity across the euro zone, this supports our forecast for UK manufacturing output to grow by 2.7% this year, the fastest rate of expansion in four years,” said Lee Hopley, chief economist at EEF.

“Some doubts will persist, however, over the durability of this upturn given the ongoing weakness in investment spending and concerns over the impact of high energy costs across the sector.”

Markit’s PMI survey from the eurozone earlier on Monday showed Europe’s manufacturing sector continuing to recover in January. The report signalled the strongest rise in activity since May 2011.

Within that, Germany saw strong growth again and Greece reported the first rise in output for 55 months.