Engineering news
The Purchasing Manager’s Index (PMI) measure of business activity in the UK manufacturing sector improved significantly to 52.9 in January from the previous month's 52.1, and above market expectations of 51.6, meaning that PMI has remained above the neutral 50.0 mark for 34 successive months.
The production increase reflected inflows of new work from the domestic market. However, the trend in new export order fell back into decline.
Companies linked lower overseas sales to stronger competition and tough market conditions. Some firms also noted that, despite recent easing, the sterling-euro exchange rate remained an issue impacting on trade flows with the eurozone.
The ongoing weakness in global commodity prices led to a further substantial reduction in manufacturers’ average purchasing costs during January. Average input prices fell at the fastest rate for four months and to one of the greatest extents during the 24-year survey history. There were reports of lower prices for chemicals, metals, oil and plastics.
Part of the reduction in raw material costs was passed on to clients in the form of decreased factory gate prices, the fifth reduction in as many months. The rate of output charge deflation remained mild.
Commenting on the report, Rob Dobson, senior economist at Markit, said: “The UK manufacturing sector registered an uptick in its rate of expansion at the start of 2016, shrugging off a number of potential headwinds, ranging from global financial market volatility to localised flooding in the North of the country.”
He added: “The domestic market remains the key growth driver. In contrast, the trend in new export orders continues to disappoint, falling back into reverse gear in January. Even after recent easing in the exchange rate, a number of manufacturers are still finding that the strength of the pound against the euro is impacting order inflows. Reports from companies also highlight how the general operating environment has become increasingly competitive both at home and abroad
David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply, said: “The domestic market continued to buoy up manufacturing growth as the year starts in a positive, if slightly reserved fashion.
“Though the PMI survey has generally signalled growth of production and new orders through much of the past three years, January also saw respondents cite increased competition, challenging exchange rates and a more difficult marketplace as factors making it increasingly difficult to win new contracts and protect margins hard won in recent months.