Manufacturing ended 2016 with a strong tailwind, showing the fastest pace of growth in 17 months in December, according to the latest Investec PMI for the sector.
The headline PMI improved to 55.7 last month, from November’s 53.7 outturn, with Investec saying the move supports its contention that the worst of the pressure seen in the aftermath of the UK’s Brexit vote has passed.
New orders, which briefly dipped into negative territory in the immediate wake of Brexit, expanded at their fastest pace since last January, while the rate of expansion in manufacturers’ quantity of purchases quickened to its fastest pace since May 2015.
Despite this increase, companies’ stocks of purchases declined slightly for an eighth successive month.
The rate of creation in manufacturing was also higher in December, accelerating for a third successive month to the fastest pace in 19 months.
The report also indicates a sharp monthly rise in new export orders, as activity in Brtain improves.
Increased client demand also fuelled a further sharp rise in backlogs of work, extending the sequence of growth here to three months.
Figures also show a rise in input costs again in December, with firms blaming higher raw material costs for this.
Manufacturers were in a position to pass on at least a portion of this jump by hiking output prices, as they have been doing now for a number of months.
Commenting on the research, Chief Economist with Investec Philip O’Sullivan said: “The headline Manufacturing PMI has been consistently above the 50 ‘no change’ mark separating expansion from contraction for 43 months.
“While growth slowed precipitously following the UK’s Brexit vote, the accelerated pace of expansion seen since then shows that the sector has gotten back on track, presumably aided by the kicker from a strong US dollar and ongoing domestic strengthening.”
