United Kingdom: UK manufacturing sector starts the year on a strong footing
February 1, 2017
The manufacturing IHS Markit/CIPS Purchasing Managers’ Index (PMI) inched down from a two-and-a-half-year high of 56.1 in December to 55.9 in January. The index remains comfortably above the 50-point threshold that separates expansion from contraction in the manufacturing sector.
January’s strong figure was underpinned by the fastest pace of output growth since May 2014 as a result of an expansion in new order intakes. January also saw a healthy rise in new business thanks to a buoyant domestic market, with export orders increasing at a more sedate pace. On the downside, input cost inflation surged to a record high last month, as producers saw themselves faced with a double whammy of a weak sterling exchange rate and higher costs for commodities such as oil, plastics and steel. Part of these cost increases were passed on to consumers, as evidenced by a sharp rise in average selling prices. According to HIS Markit/CIPS analysts, “Companies seem fairly sanguine (regarding costs pressures) […] Taken alongside robust output growth, rising new order inflows and job creation, all signs are pointing to a solid contribution to UK GDP from manufacturing during the opening quarter of 2017.”
Author: Oliver Reynolds, Economist