UK factory output hits six-month high

The UK's manufacturing sector output grew at the fastest pace in six months in January as factories shrugged off the impact of Omicron and global supply chain pressures began to ease.

The IHS Markit/CIPS Purchasing Managers’ Index (PMI) showed the output index rose to 54.5 in January - its highest since July 2021 - up from 53.6 in December. Any figure above 50.0 denotes growth.

It was the UK manufacturing sector's 20th successive month of expansion.

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"The start of 2022 saw growth of UK manufacturing output and employment strengthen, as companies responded to improved new order intakes, rising backlogs of work and addressed shortfalls in capacity. Although supply chain constraints continued to stymie growth, there were signs that these were passed their peak, a factor contributing to a slight easing in purchase price inflation," Markit said.

Increased output reflected rising new order intakes, efforts to tackle backlogs of work and a slight improvement in export demand. Some firms also noted that supply chain stresses, staff shortages and slower growth of new work had stymied efforts to raise production further.

Stronger output growth had a positive impact on the trend in job creation during January. Manufacturing employment increased for the thirteenth consecutive month, with the rate of expansion the second-steepest in 11 years.

Companies linked recruitment activity to new project launches, greater demand for products, preparations for future growth and efforts to address capacity shortfalls and rising backlogs.

Inflationary pressures also appear to be slowing, according to Markit.

"Although input price inflation remained substantial compared to the historical standards of the survey, the rate of increase eased to a nine-month low," Markit explained.

Read more: COVID drags down UK retail sales for January

"There was some disappointment in the lowest levels of new orders since February 2021 but moderate improvements in export orders balanced out the weaker rise in domestic work," Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said.

The survey was largely positive, though there were some "causes for concern", Markit analyst Rob Dobson warned.

“Causes for concern remain, however, as new orders growth slowed, exports barely rose, staff absenteeism remained high and manufacturers' ongoing caution regarding supply chain disruptions led to the beefing up of safety stocks.”

The headline PMI, which measures activity across the sector, dipped to a four-month low of 57.3 in January from 57.9 in December.

It was pulled down by a slowdown in new order growth, and faster deliveries from suppliers, as the strains on global supply chains eased.

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