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Friday 29th of October 2010
February 1, 2010    

UK manufacturing activity grows at fastest rate for 15 years

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by Kay Murchie

The CIPS/Markit manufacturing purchasing managers’ index (PMI) has today revealed UK manufacturing activity rose at its fastest rate in 15 years in January.

The figures will boost hopes that the economic recovery is gathering pace after last week’s disappointing fourth quarter GDP figures.

The PMI grew to 56.7 in January, up from a revised 54.6 the previous month. The closely-watched index is now at the highest level since October 1994 and exceeded analysts’ expectations of a reading of 54.

Meanwhile, new orders rose at their fastest rate since January 2004, up to 60.4 - a reading above the crucial 50 mark represents growth.

In addition, growing demand drove the employment index above the 50 mark for the first time in almost two years.

Rob Dobson, senior economist at Markit, comments: “The survey raises hopes that the sluggish recovery from recession signalled by GDP data in the final quarter of last year will have gained momentum as we move into 2010.”

Many analysts were encouraged by the strong figures but some expressed caution. Stephen Lewis from Monument Securities said: “The PMI was stronger than expected. I don’t think this necessarily means there is an improvement in underlying conditions.

“It may simply mean that those who are responding feel better about the conditions than they did,” he added.

In related news, the latest quarterly SME Trends Survey by the CBI has found that small and medium-sized manufacturers are starting to stabilise after seven quarters of decline.

According to the business body, manufacturers are starting to benefit from the weakness of the pound, which has fallen slightly against the US dollar over the last few months.

The survey found that 27% of respondents experienced an increase in export orders in November to January, while one quarter saw a decline - resulting in a balance of +2%.

The balance of +2% was the best performance for exports in two years - when the figure was +12%.

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