A New Year revival from the UK’s manufacturers has put the wider economy on course to pick up the pace from its slowdown at the end of last year, according to the latest snapshot of the industry’s fortunes.
The Chartered Institute of Procurement & Supply’s index, where a score over 50 indicates growth, accelerated to 53 in January, helped by the first significant rise in new export orders for five months.
UK firms were helped by higher demand from a range of countries including France, Germany, Japan, the Middle East and the US.
Tumbling oil prices have sent manufacturers’ input costs falling at the fastest rate since May 2009, boosting profits so far as manufacturers’ prices have dropped by a far lesser extent.
Cips chief executive David Noble said the modest acceleration among manufacturers “may be enough to allay fears of an overall slowdown in the UK economy”.
Figures last week showed the UK economy overall expanding 0.5% in the final quarter of 2014, the slowest rate for a year.
The brighter picture at home contrasted with China, whose factories saw shrinking activity for the second month. Across Europe, manufacturing growth is sluggish.
In the UK, manufacturers grew output for the 23rd month running in January while the industry hired more staff for the 21st month in a row, according to Cips.
The sector managed growth of just 0.1% in the last quarter but should see stronger growth in the months ahead as lower energy prices feed through.
Scotiabank’s head of fixed income strategy Alan Clarke said: “Manufacturing should benefit more than services given that it is more energy intensive.
“We would expect business sentiment to continue to improve in the coming months, with that feeding into a reacceleration in GDP growth into mid-year.”
James Knightley, UK economist at ING, added: “With the consumer sector supported by real wage increases and rising employment and with confidence back close to series highs, we anticipate that first-quarter growth will show an acceleration from the rate recorded in the final three months of last year.”
