Today’s PMI is a positive surprise as we start off the New Year telling us that 2012 ended more strongly than expected and beating expectations by a considerable amount. The consensus forecast was for an unchanged negative outturn with the headline index expected to rise to 49.7 from 49.1 in November.
Instead the December PMI surprised us at a positive 51.4
The rise in output and orders at the end of last year is a positive signal that the sector can continue to grow in the year ahead
This positive PMI indicates that more manufacturers saw production increase than decrease in December. This is the highest PMI recorded for 15 months and is also the first time since April 2012 that the PMI has been back in positive territory.
However, the strength of recovery will continue to depend on what happens in other parts of the world
A major area of concern remains exports which showed a contraction – export orders remained below the neutral 50 while overall orders were above 50. Looking out to those key export markets shows that things are still looking patchy.
The Eurozone continues to struggle and the Eurozone PMI remained relatively unchanged at 46.1, down from 46.2 in November.
The US fiscal cliff deal that was agreed yesterday has provided some relief to the risks and has lifted markets around the world as they opened for business in 2013. This is not the end of the challenges though and more decisions will need to be taken in the year ahead.
UK manufacturers and exporters, in particular, will be hoping to see stability in the eurozone and signs that demand will continue to hold up in the US and emerging economies in the coming months.