Manufacturing begins 2012 with rapid expansion

Manufacturers started 2012 on the front foot after figures today showed the sector expanded at the fastest pace since last March.

The better-than-expected purchasing managers' survey by Markit/CIPS showed an overall reading of 52.1, higher than the 49.7 recorded for the previous month. A figure above 50 indicates growth in the sector.

The overall economy contracted by an estimated 0.2% in the fourth quarter of 2011 but today's figures will fuel hopes that the UK's expected return to recession during the current quarter will be mild.

CIPS said output growth was at a 10-month high, while there was further cheer for the wider economy after it emerged factory bosses saw costs fall at the fastest pace since mid-2009.

Manufacturers reported lower costs for commodities, metals, packaging, paper, plastics and timber.

CIPS chief executive David Noble said: “The UK manufacturing sector has sprung to life in the first month of 2012 to defy any economic gloom, but it is too early to say whether this trend is sustainable.”

The organisation said foreign orders rose for the second month running in January amid reports of improved demand from clients in Brazil, China, the Middle East and the United States.

Mr Noble added: “In the long-term, it's looking like businesses will need to refocus on emerging growth markets outside the weaker eurozone to achieve sustainable growth.”

Employment in the manufacturing sector was broadly unchanged in January, with the improvement in payroll numbers in small and medium-sized enterprises offset by cuts implemented at large-sized companies.

Samuel Tombs, an economist at Capital Economics, said the survey increased the chances that the overall economy returned to growth in the first quarter.

However, he added: "With only one month of the quarter having passed and the headwinds from the eurozone likely to intensify, it is far too early to say that the economy has avoided a renewed recession."

PA