11th Feb 2015

British manufacturers enjoyed a slightly accelerated 0.2% growth rate in January as oil prices and small but increasing demand in overseas exports – beating city economists expectations.

Manufacturing output rose 0.1 percent in December after growth of 0.8% on the month in November, confounding predictions in a Reuters poll of a 0.1 percent fall.

PMI rose to 53 in January from 52.7 in December, and any figure above 50 indicates growth in the sector.

Cheaper oil prices has lead to a sharp drop in the overhead costs for companies in the UK, the Markit survey found.

The Markit company behind the PMI figures said that lower costs led to manufacturers being able to cut their prices for the second time in the past 5 years. While the growth is only modest at 0.2% for the first month, up from the 0.1% of the last three months of 2014, the growth has provided a little but meaningful boost to the economy in the first month and is likely to keep this trend into 2015 according to Rob Dobson, senior economist at Markit.

Small Export Growth

While the domestic market remains the dominant market for UK business, there were signs of improvements in overseas markets including some European countries bucking the trend of the Eurozone as a whole. According to the chief economist at EEF.

British manufacturing output is still around 5.3 percent below its pre-downturn peak in early 2008.

Orders from both home and abroad came in faster last month, the PMI showed, with the new export orders index hitting a five-month high.

With oil prices more than halving over the last six months to below $50 a barrel, prices paid by manufacturers for raw materials fell at the fastest rate since May 2009, with this part of the index tumbling to 40.1 from 46.3, one of the sharpest declines on record.

Producers cut prices charged to customers much more modestly, though this was still their first price cut in 19 months and the biggest since September 2009.

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