Resurgent PMI "shot in the arm" for UK manufacturing

The well-regarded Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI) rose to an eight-month high of 52.1 in January. Output expanded at the fastest pace since last March, new orders rose following a period of contraction and payroll numbers stabilised. Cost pressures continued to ease, as average input prices fell for the third straight month. Manufacturing production expanded for the second successive month in January, supported by growth of new orders and the clearance of backlogs of work. Companies reported an increased willingness to spend among some UK clients and a further increase in new export orders. Foreign demand rose for the second month running in January, amid reports of improved order inflows from clients in Brazil, China, the Middle East and the US. Manufacturers also reported lower costs for commodities, metals, packaging, paper, plastics and timber. Employment numbers rose at SMEs, in contrast to cuts implemented at larger companies. Higher employment overall was linked to increased production. Where a reduction was reported, this was generally linked to cost-control, redundancies and economic uncertainty. Rob Dobson, senior economist at Markit and author of the PMI, said: "January saw manufacturing kick-start back into life" before cautioning that growth was "nowhere near the surging highs of 12 months ago". David Noble, CEO at the Chartered Institute of Purchasing & Supply, described the UK manufacturing sector as springing to life in the first month of 2012 but added that it was too early to say whether the trend was sustainable. "In the long-term, it's looking like businesses will need to refocus on emerging growth markets outside the weaker Eurozone to achieve sustainable growth even though spending was at a higher level in the UK compared to last month," he added. "If emerging markets are the future, breakdowns in supply owing to port closures and the impact of flooding in Thailand underline the need to ensure international supply chains are sufficiently flexible, robust, with an understanding of risk mitigation to maintain business continuity." Mark Lee, head of manufacturing, Barclays Corporate said the figures were a shot in the arm for manufacturing, a sector that appeared to be increasingly looking outside of the Eurozone for export growth. At EEF, the manufacturers' organisation, Chief Economist Lee Hopley was more cautious, warning that the data was not a return to strong growth. However, it was, she said a "rebuttal to fears that manufacturing is sliding backwards."