January's manufacturing PMI rose to 62.0, beating even the last two months' sixteen-year highs. This reflects the continued strength shown in the sector, which grew by 1.4% in the last quarter of 2010, despite a contraction in the broader economy.
However, there are still challenging times ahead for manufacturers. Specifically, the PMI shows that input prices are continuing to put pressure on companies, rising at the fastest pace in the survey's history. Similarly, domestic demand is likely to be reduced this year, as a result of higher living costs and government spending cuts. This means government has a key role to play in throwing off burdens to growth in the form of higher taxes and regulation. The Growth Review will need to take a cold hard look at whether polices will now nurture or derail companies' plans to invest and grow in the UK.
Figure 1: January's PMI hits yet another record high