Today's Manufacturing PMI shows UK manufacturers began 2014 in positive mood. With a 56.7 result, the PMI shows that the solid activity trends seen during the second half of last year have been maintained.
A few highlights from the PMI release:
- Demand for investment goods has picked up.
- New export orders grew in January from a broad base of countries, supporting the robust domestic order growth we have seen for some time now.
- Payroll numbers were strong across all firm sizes and are being supported by output and order growth that remains higher than the long-run trend.
What is going on in the rest of the world?
Releases for countries around the world show a bit of a mixed picture. We see further improvement in manufacturing activity across the euro zone with most countries showing expansion in manufacturing. France continues to be an outlier and signals the sector is contracting. The Chinese PMI dipped back into negative territory for the first time since July 2013 as expansion of output and new business activity slowed over the month. In the US, activity slowed with the PMI falling back from the 11-month high reached last month, but still remains in firm expansion territory.
January Manufacturing PMIs50=neutral
What does this tell us about our forecasts?
Today's data supports our forecast for UK manufacturing output to grow by 2.7% this year, which will be the fastest rate of expansion we would have seen in four years. Some doubts over the durability of this upturn will persist though, given the ongoing weakness we have been seeing in investment spending and concerns over the impact of high energy costs across the sector.