Manufacturing PMI sees record growth

1 February 2011
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1 February 2011 | Angeline Albert

UK manufacturing is driving the nation’s economic recovery, rising to a record high at the start of 2011.

The Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI) recorded 62 in January, up from 58.7 in December. The pace of growth in new orders and employment was a record, while output expanded at its fastest since the mid-1990s.

UK companies reported improved demand from domestic and overseas markets. Client restocking also contributed to the rise in new orders. Employment in the sector rose for the tenth successive month, with rising production requirements, improved market conditions and the launch of new product lines.

Inflationary pressures continued to build in January, with substantial increases signalled for input costs and factory gate prices. Manufacturers indicated many inputs had risen in price including chemicals, cotton, energy, food products, metals, packaging, paper and timber.

Rob Dobson, survey author and senior economist at Markit, said:Manufacturers made a record-breaking start to 2011, confirming that the sector remains one of the brighter spots of the UK economy. Manufacturers are still being buffeted by rising cost pressures, however, with raw material prices rising at the steepest pace since the survey began in 1992. Increasing signs of these costs are being passed down the supply chain in the form of higher factory gate prices, the hackles of the hawks on the Bank of England’s monetary policy committee will no doubt be raised.”

The PMI showed manufacturers are accumulating raw materials to guard against price and supply pressures. David Noble, CEO at CIPS, said:The significant increase in purchasing activity shows that manufacturers are feeling confident about the future and ensuring they have sufficient stock to meet increased orders. It’s also apparent that most are looking to build up inventories and make certain that they’re not caught short in the face of raw materials shortages.”

The Markit Final Eurozone Manufacturing PMI also rose to a nine-month high of 57.3 in January, up from 57.1 in December. Input price inflation accelerated in all Eurozone countries. Part of the cost increase for fuel, food and metals reflected demand exceeding supply, which was highlighted by another sharp deterioration in average supplier delivery times.

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