UK Manufacturing PMI rose to a nine-month high in January

According to the report from IHS Markit/CIPS, the start of 2020 saw the performance of the UK manufacturing sector steady following the downturn experienced through much of last year. Reduced levels of political uncertainty following the general election led to mild recoveries in new orders and business confidence and a stabilisation of production volumes. Overseas demand remained a constraint, however, as new export orders fell for the third straight month.

The seasonally adjusted Manufacturing PMI rose to a nine-month high of 50.0 in January, identical to its no-change mark and above December's reading of 47.5. The PMI last posted a reading above its neutral 50.0 level in April 2019.

Output rose in the consumer and intermediate goods sectors, as manufacturers in these industries scaled up production in response to improved inflows of new business. In contrast, the downturn in the investment goods sector continued, with output and new work intakes declining sharply (albeit to lesser extents than before the turn of the year).

The trend in new export business continued to weigh on the UK manufacturing sector in January. Companies cited weak economic growth in key markets - especially within Europe - as the main factor underlying the latest decline in new export orders. Signs of stabilisation in the manufacturing sector at the start of 2020 filtered through to trends in hiring and business confidence. The level of employment was broadly unchanged during January, halting a nine month sequence of job losses. Optimism improved to an eight-month high, with 47% of manufacturers forecasting that output would expand over the year ahead. Improved confidence reflected reduced political uncertainty, higher demand, an expected recovery in export volumes and planned new product launches.