Boost for beleaguered factory bosses

Britain's beleaguered factory bosses were given a lift today after a survey reported the sector's best month for two years during December.

The Chartered Institute of Purchasing & Supply's (CIPS) headline activity index - where a score over 50 registers growth - reached 54.1, up from 51.8 in November and much better than the 52 forecast by City economists.

The average reading for the fourth quarter of 2009 was also the highest since the end of 2007, fuelling hopes that the UK exited recession in the period.

CIPS said improved market conditions and restocking by clients meant new orders rose at their strongest pace for 29 months in December.

This was mainly due to the domestic market as growth in new exports was only slight, despite expectations of greater assistance from a weaker pound.

CIPS chief executive David Noble said the sector was slowly regaining its footing after one of the toughest years on record.

However, he added that the troubles of the downturn were still close at hand as competition meant prices charged by firms remained under pressure.

The sector also continued to cut staff numbers during the period, although the rate was the weakest since May 2008. Most of the job losses were in large-sized enterprises, with smaller firms reporting an increase in staffing.

The survey boosted hopes that industrial production made a limited contribution to GDP growth in the fourth quarter of 2009 for the first time in two years.

Howard Archer, an analyst at IHS Global Insight, said manufacturers were benefiting from markedly reduced stock levels, while the weak pound should help exporters.

He added: "This is welcome news but it needs to be borne in mind that the manufacturing sector is still far from racing ahead and serious doubts remain about the strength of demand for manufactured goods over the medium term, particularly once stimulative measures start being withdrawn."