UK manufacturing activity edges higher in January

image captionManufacturing has shown signs of recovery, albeit weak, for the last two months

Activity in the UK's manufacturing sector edged higher in January despite falling export orders, a monthly survey has suggested.

The Purchasing Managers' Index fell slightly to 50.8 from 51.2 in December. Levels above 50 indicate expansion.

Factories ran down inventories and worked through existing order backlogs as total new orders grew only modestly.

The jobs market in the sector also stabilised further during the month, the survey's producer, Markit, said.

Export orders were hit by the poor state of the eurozone economy, the biggest overseas market for UK manufacturers, falling for the 13th month in the row, according to the 600 industrial firms surveyed in conjunction with the Chartered Institute for Purchasing and Supply.

But this was more than offset by reasonable growth in domestic demand, with orders for consumer goods particularly strong.

The manufacturing PMI index has remained stuck around the 50 mark since the late summer of 2011, corresponding to the general stagnation in manufacturing output growth that has been reported by the Office for National Statistics over the same period.

"A second consecutive month of improving business conditions in the manufacturing sector is an encouraging start to 2013," said Rob Dobson, who compiles the survey for Markit.

"Companies reported that output growth fathered further momentum, reaching a 16-month high, suggesting that the sector could help lift the economy from the slide back into contraction late last year."

Worldwide recovery

The modest upturn in the sector over the New Year has come as financial markets show increasing bullishness that the industrialised world may be past the worst of its post-crisis stagnation of the last five years.

"There are reasons to believe this expansionary trend could be maintained in the coming months, with European indicators at least stabilising, emerging market activity improving and, a weaker sterling helping some sectors in overseas markets," said Lee Hopley, chief economist at the UK manufacturing trade body, the EEF.

"Many manufacturers are also expecting to secure some growth this year from new product launches and a continued push into markets outside Europe."

Similar manufacturing surveys from Asia and Europe suggested that the sector saw a gradual improvement worldwide in January.

In China, the recovery in factory output appeared to gather pace in the month, although activity levels remain some way below those seen two years ago and before the 2008 financial crisis. It was a similar story in Taiwan.

Japan's manufacturing downturn eased in January, while in Korea the sector continued to tread water following several months of contraction.

The rate of contraction in the eurozone also abated in January, with the sense of crisis over the single currency's future having dissipated since last summer.

In Germany, activity more-or-less stabilised, while the deep falls in business seen in Italy and Spain continued to ease during the month.

However, France remains a worry, with the fall in output accelerating and a sharp drop in new orders pointing to more trouble ahead.

A survey for the US will be released later in the day.

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