British manufacturers revved up the pace of activity to a 15-year high last month, according to a survey today, suggesting the economy made a strong start to 2010 after a limp return to growth at the end of last year.
However, a slowdown in the pace of mortgage lending and the first fall in mortgage approvals in more than a year injected some uncertainty about the sustainability of any upturn.
Market reaction to the manufacturing figures was muted as they merely reinforced the widely held view that the Bank of England will announce a pause in its £200 billion sterling quantitative easing programme later this week.
The CIPS/Markit manufacturing purchasing managers' index jumped to 56.7 last month from an upwardly revised 54.6 in December, its highest since October 1994 and well above analysts' forecasts for a reading of 54.
The improvement came after new orders rose at their fastest pace in six years - helped by stronger domestic and export demand - and output growth was the fastest since June 2006.
But analysts questioned the divergence between the PMI surveys and official data, as the PMI has signalled growth for several months but GDP figures showed the economy grew a lacklustre 0.1% in the final quarter of 2009.
New orders rose at their fastest pace since January 2004, with an index reading of 60.4, with the improvement driven by the sharpest growth in export orders since data were first collected in 1996, suggesting the weak pound is giving a boost to British manufacturers.
The pick-up in demand meant many firms had to take on more staff, pushing the employment index above the 50-point level that separates expansion from contraction for the first time since April 2008.
There were also signs that inflation pressures are picking up, with input prices rising at the fastest pace since September 2008, reflecting higher commodity prices, while output prices accelerated at their fastest since October 2008.
However, figures from the Bank of England, also published today, suggested money supply growth was still tight, and raised doubts about the sustainability of an upturn.
The bank said that the number of loans approved for house purchase fell to 59,023 in December from 60,045 in November, while mortgage lending growth also eased.
