UK manufacturers have shrugged off big input price increases to start 2017 in fine form, while activity in the Eurozone has reached its highest point since a debt crisis almost brought the continent’s economy to its knees, according to closely watched indicators.
Growth in the sector’s output reached its highest point since May 2014 as the overall purchasing managers’ index (PMI) recorded its sixth straight month of growth in the UK’s manufacturing sector.
The UK’s manufacturing PMI dipped slightly to 55.9 in January, according to data providers IHS Markit, only slightly down from a 2.5-year high in December. Any measure above 50 indicates an expansion in activity in the manufacturing sector.
The healthy expansion came despite a record increase in input prices, as inflationary pressure continues to build following the devaluation of sterling since the vote to leave the EU.
Domestic orders were a source of strength for the UK’s manufacturers, with some signs of an upward movement in exports.
Mike Rigby, head of manufacturing at Barclays said: “Although the growing prospect of inflationary pressure looms large and the impact of Brexit continues to cause much uncertainty, it is encouraging to see that the manufacturing sector is just getting on with business as usual.”
Meanwhile, Eurozone manufacturing PMI was revised up to 55.2, continuing a streak of expansion in the sector that has run unbroken since July 2013.
A growth in new business not seen since the first half of 2011, before the Eurozone debt crisis began to bite, helped sustain recent output highs, while job creation continued to move higher.
Austria, the Netherlands, and Germany were the main drivers of expansion. The latter, the largest economy in Europe, saw its manufacturing sector rise to a three-year high.
Meanwhile expansion in France’s manufacturing sector rose to a 68-month high, despite a looming election.
Chris Williamson, chief business economist at IHS Markit, said: “Optimism about the year ahead has risen to the highest since the region’s debt crisis, suggesting companies are maintaining a buoyant mood despite the heightened political uncertainty caused by Brexit and looming general elections in the Netherlands, France and Germany.”