UK manufacturing made a positive start to 2014. Rates of expansion in output and new orders remained well above their respective long-run trends, supporting a solid increase in payroll numbers.
The seasonally adjusted Markit/CIPS Purchasing Manager's Index (PMI) posted 56.7 in January, down from December's 57.2.
Although the PMI currently stands at its lowest level in three months, it is still well above the series average of 51.3. The headline index has signalled an improvement in operating conditions in each of the past 10 months.
The strong upturn in manufacturing production was maintained in January as companies scaled up output in response to stronger inflows of new orders. There were reports of improved demand from the domestic market and rising levels of new business from overseas.
The latest expansion in new export orders was broad-based by source, with UK manufacturers mentioning improved demand from North America, mainland Europe, Asia, Brazil, Scandinavia and the Middle-East. Moreover, the ongoing improvement in global market conditions drove the rate of increase in new export business to a near three-year record.
The rebound in the sector led to further job creation at the start of the year. January saw employment increase for the ninth successive month, with the rate of jobs growth remaining close to November's two-and-a-half year high.
Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "Manufacturers have begun the year in positive mood, maintaining the solid activity trends seen during the second half of last year. 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.
"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."
The latest rise in payroll numbers was broad-based. Increases were reported by SMEs and large-sized companies and across the consumer, intermediate and investment goods sectors.
Average purchasing costs rose for the ninth straight month in January, reflecting higher prices paid for a number of inputs (including timber and related by-products).
However, the rate of increase eased to its weakest since last July. The steepest rise in input prices was registered in the intermediate goods sector. In contrast, rates of inflation eased sharply at consumer and investment goods producers.
Rob Dobson, senior economist at survey compilers Markit: "UK manufacturing made a strong start to the new year, continuing the robust upsurge in production seen at the tail end of 2013. Although the pace of output expansion has cooled slightly in recent months, growth is still tracking at one of the highest rates in the 22-year survey history. The broad base of the upturn is remarkable, with its benefits being felt across all product categories and at SMEs and large-scale producers alike."