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New PMI figures reveal a healthy start to year for manufacturing

THE UK manufacturing sector has continued to grow at the start of 2014, although the pace of expansion has slowed slightly.

The Markit/CIPS manufacturing Purchasing Managers index (PMI) for January showed a reading of 56.7.

That was down on the 57.2 recorded in December but still comfortably above the 50 level which separates expansion from contraction.

The figures suggest there was improving demand from the domestic market in January, as well as rising levels of export orders from areas such as North America, Asia, Brazil, the Middle East and mainland Europe.

Rob Dobson, senior economist at Markit, said: "Although the pace of output expansion has cooled slightly in recent months, growth is still tracking at one of the highest rates in the 22-year survey history.

"The broad base of the upturn is remarkable, with its benefits being felt across all product categories and at SMEs and large-scale producers alike."

Employment increased for the ninth month in a row with the rate of growth close to the 30-month high posted in November.

Howard Archer, from IHS Global Insight, said: "This is still a very encouraging survey and the manufacturing sector looks to be in a good place at the start of 2014. Indeed, the manufacturing PMI survey offers real hope that UK growth is starting to become more broad based, with investment and exports increasingly kicking in to help matters."

Samuel Tombs, from Capital Economics, said: "The outlook for manufacturers remains relatively bright.

"While the stronger pound may begin to hinder a recovery in exports, the easing of both credit constraints and the squeeze on households' real pay should support a further revival in domestic demand for investment and consumer goods."

Further evidence of improvement in the sector is shown in the CBI's latest SME Trends Survey, which is published today.

That report, which takes in the views of 335 SME manufacturers, found total orders and output volumes increased in the three months to January thanks to stronger domestic sales.

While exports fell during that period, work at home and abroad is expected to pick up in the coming quarter, with optimism in the sector improving for the third consecutive quarter.

Planned investment on new buildings has risen to record levels, while expenditure on plant and machinery also continued to strengthen.

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