01 January 2013
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Looking forward to a prosperous 2013

There's nothing like starting a new year with some good news. And as if to order, a survey last week showed that UK manufacturing's Purchasing Managers' Index (PMI) rose to a 15-month high in December.

The rise takes the index above the 50-mark that separates growth from contraction for the first time since last March.

The Markit/CIPS index high of 51.4 in December from an upwardly revised 49.2 in November was a far stronger increase than any predicted in a Reuters poll of 24 economists. British factory activity jumped unexpectedly in December to grow at its fastest pace since September 2011, raising the chance that the economy eked out growth at the end of 2012.

Britain's economy was forecast to shrink 0.1% in the last three months of 2012. But stronger-than-expected official services output data for October, released just before Christmas, raised the prospect that the economy will avoid contraction.

Rob Dobson, the Markit economist who compiled the survey, believes that UK manufacturing exited 2012 on a positive note, with December's PMI data signalling a reassuringly solid return to growth. "The domestic market remained the main spur for growth, although there are also signs that global trade flows are stabilising as China and the US strengthen and the downturn in the euro zone eases," Dobson commented.

Although the sector makes up just 10% of British output, the output component of the manufacturing PMI rose to 54.0 in December, its highest level since April 2011, from 50.5 in November. However, Markit suggested the sector still contracted for the fourth quarter overall.

New orders rose at the fastest rate since March 2011, driven by domestic demand, while export orders fell, albeit at the slowest pace since September. Employment in the sector fell marginally, while showing the smallest decline since August.

It is to be hoped that the PMI figures for the construction sector, due out this week, will give us further cause for confidence.

Paul Gay


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