02 January 2004 | Gareth Mytton
The UK manufacturing sector enjoyed its most successful month in December for four years on the back of big increases in new orders, according to the latest PMI figures.
The purchasing managers' index (PMI) - a composite indicator of economic conditions in which 50 indicates no change on the previous month, compiled CIPS and NTC Research - rose to 56 in December.
The growth in new orders (57.6) slowed slightly on November's figures and helped to swell employment. However, trade improved strongly with the US and improved with key European and Asian markets. Output (58.4) accelerated to meet increasing demand and prevent backlogs.
Purchasing activity increased markedly (57.9) to meet orders and, in some cases, to build up inventories in the face of supply shortages. Stocks were also increaseed to allay fears that suppliers may struggle to meet growing demand.
Input prices, at 56.7, reached the highest level since March, with metals and metal manufactures reportedly increasing in price. Some firms also blamed global demand for raw materials for causing shortages. Suppliers' delivery times worsened, at 43.
Companies also passed some of the price increases on to customers (50.6).
In the euro-zone, Germany provided the main engine of growth for the manufacturing sector. The euro-zone PMI rose slightly in December to 54.5. New orders have now risen for five months at an accelerating pace each month.
Purchasing managers in the US manufacturing industry are confident that its economic recovery is under way, according to its national survey. The Institute for Supply Management's manufacturing report on business for December puts the PMI at 66.2, the new orders index at 77.6 and the new export orders index at 60.4.
American purchasing managers reported a similar increase in input prices to their UK counterparts, with the prices index accelerating to 66.
* More information on the UK and euro-zone PMIs is available at www.ntc-research.com
. The full text of the ISM reports on the US economy for December, and previous reports, is available at http://www.ism.ws/ISMReport/index.cfm.