-Lee Hopley, chief economist at the EEF manufacturing trade association
Business activity in the British factories rose more than expected in January amid a recovery in export orders and lower production costs as raw material prices dropped at the quickest rate since May 2009. Markit/CIPS UK manufacturing PMI climbed to 53.0 from an upwardly revised 52.7 in December, staying comfortably above the crucial 50-level, which separates contraction from expansion. The gauge has been in the expansion territory for 23 months in a row. Output growth and new orders rose, while input costs fell at the fastest pace in over five and a half years, according to data compiler Markit. That meant the prices charged by producers to customers dropped for the first time in 19 months and at the fastest pace since September 2009.
British exporters have been hurt by the sluggish Euro zone, their top trading partner, amid weak consumer and business confidence in the currency bloc. The latest manufacturing data suggested there have been some glimmers of light from overseas while domestic demand still remained the main driver. British manufacturing output is around 5.3% below its pre-downturn high in early 2008. Despite growing last year at the fastest annual rate since 2007, the UK economy expanded more slowly than expected in the final quarter of 2014, and the government will be trying to avoid signs of a further slowdown ahead of a May 7 national election.
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