Today we had a couple more positive pieces of data release relating to the end of last year. December has proved to be a much stronger month than originally expected and this may be a tentative sign of markets beginning to pick up and stabilise.
The PMI hinted at a strong end to 2012 for the UK…
- The positive 51.4 manufacturing PMI for December gave us a positive surprise telling us that orders on balance were up for the UK.
- January's PMI was slightly weaker at 50.8 but remained above the crucial neutral-50.
While the UK is looking more positive that it did for much of 2012, some of the UK's key markets give us a bit of a mixed picture. Our European counterparts continue to struggle and are firmly in contraction and, while there is some variation between countries, most PMI's remain below the 50 mark. The US and China look better with above 50 PMIs signalling improving operating conditions for the manufacturing sector in these respective economies.
…and today's data confirms that the manufacturing sector finished 2012 on a high note
- Manufacturing output rose by 1.6% in December after contracting 1.2% in October and 0.4% in November. Combined this led to a small upward revision to manufacturing output to a contraction of 1.3% in 2012q4.
- The UK's balance of trade improved to £3.2bn in December, from £3.6bn in November.
- Goods exports to EU countries fell £0.6 billion in December but rose to non-EU countries by £1.4 billion.
Patterns of UK trade have been shifting over time with around 50% of our exports now going outside of the EU. This is up from 38% in 2002. However, the EU remains an important trade partner and, with economic conditions continuing to look worrying in the year ahead for the Eurozone, companies that export heavily to the EU may find 2013 to be quite tough. Manufacturers with trade links outside of the EU will likely fare much better as exports grow faster and demand for products from emerging markets is expected to pick up.