Firms’ order books show growing signs of recovery

The closely-watched Markit/CIPS purchasing managers’ index (PMI) – where the 50 mark separates growth from contraction – showed a reading of 57.3 in December.

This figure is down slightly on November’s 58.1, but it marks the ninth month of rising output in a row.

The average reading for the final quarter of 2013 was the highest since the first three months of 2011, at 57.2.

David Noble, chief executive at the Chartered Institute of Purchasing & Supply, said: “UK manufacturing ended 2013 on a high and with all signs of powering ahead into 2014”.

Despite manufacturing remaining nine per cent off its pre-crisis production peak, economists hailed the results as a further sign of a “self-sustaining” recovery in the broader economy.

Rob Dobson, senior economist at Markit, said: “The question everyone wants answering is whether this upturn can develop into a self-sustaining recovery.

“The news is still good on this score, as growth is coming from a broad base that should help keep the rebound on track during the early stages of 2014.”

Samuel Tombs, UK economist at consultancy Capital Economics, said the survey provides another indication that the recovery is “the product of more than just an unsustainable boom in household spending”.

The reading for new orders slipped to 60.4 in December from November’s 19-year high of 63.9, but remained well above the historical average, while the rate of jobs growth in the sector was the second strongest for two-and-a-half years.

But the survey flagged up concerns over rising prices, as input inflation hit a 28-month high and output charges rose at the fastest clip since September 2011.

Factories faced higher energy, commodity and raw material costs, among other price pressures, according to the survey.

The sector also has to contend with a stronger pound, which is trading at its highest level against the US dollar for nearly two-and-a-half years, making products more expensive for overseas buyers.

The survey showed that the rate of growth in export business slipped to its weakest since September last year, although new exports overall rose for the ninth successive month.