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Strong exports drive manufacturing surge, raising hopes on jobs

British manufacturing is growing at its fastest rate for 15 years, research published yesterday showed, despite the rest of the economy struggling to recover from the recession.

The UK manufacturing purchasing managers' index (PMI), produced by the Chartered Institute of Purchasing and Supply (Cips) and Markit, is now at its highest level since October 1994. The index jumped to 56.7 last month, from 54.6 in December, and has now stayed above 50, the level indicating growth, for four consecutive months.

These upbeat numbers come in contrast to the figure for last year's fourth-quarter GDP growth, which came in at 0.1 per cent, bringing an end to the recession but undermining the confidence of those who had expected a return to more robust growth.

The index uses data on new orders, production, employment, supplier performance and stocks of purchases, according to Cips and Markit.

The PMI increased for the eighth month in a row, with January's hike representing the quickest expansion since June 2006. The surge was supported by improved domestic demand and the strongest growth in export orders since export data was first collected in 1996. "January data point to a robust start to 2010 for the UK manufacturing sector," said Rob Dobson, Markit's senior economist.

"The headline PMI hit a 15-year high as growth of new orders and production accelerated and employment rose for the first time since April 2008. The main driver of growth was a surge in new export orders, as improving global market conditions and the ongoing weakness of sterling led to the sharpest rise in foreign demand recorded in at least 14 years."

Economists welcomed the news and said that there is evidence of wide- ranging demand from a number of international markets. "This is an encouraging survey that gives a welcome shot in the arm to recovery hopes," said Howard Archer, chief UK and European economist at IHS Global Insight. "It does suggest manufacturers could be starting to increasingly benefit from leaner stock levels, improved competitiveness in both domestic and foreign markets stemming from the weak pound, and firmer demand in key overseas markets, including the eurozone and the US."

David Noble, the chief executive of Cips, said: "For the first time in 21 months there has been an increase in employment... Employment is usually a lagging indicator, so it suggests that firms are becoming much more confident about the future."