UK manufacturers record record growth

UK manufacturers are flying after another month of record growth gave the UK economy a "much needed kickstart" in January.

The Chartered Institute of Purchasing and Supply's closely-watched activity index - where a score over 50 means growth - jumped to 62 during the month, signalling the fastest expansion in the survey's 19-year history.

Manufacturing was virtually the only part of UK plc to register growth in the final three months of 2010, expanding 1.4% while the wider economy shrank by a shock 0.5%.

Today's figures help dispel the gloom and signal that manufacturers have not just maintained the momentum but picked up the pace at the beginning of the year.

CIPS chief executive David Noble said: "This is the much needed kick start to 2011 everyone in the sector was hoping for, particularly in light of last week's poor GDP figures."

Rob Dobson, senior economist at financial informaition group Markit, said export growth was boosted by recovering domestic demand. "There are also signs of life in domestic consumer and business spending," he said.

But rising costs for raw materials such as chemicals, food and energy also stoked fears over inflation with oil prices above $100 a barrel. Sterling gained more than a cent against the dollar to move above $1.61 as markets bet that the sector's strong performance and inflation worries strengthened the case for rate hikes.

According to CIPS, manufacturers have seen growth for 20 successive months while employment in the sector grew for the tenth month in a row. The survey revealed a near-record rise in export orders with soaring sales to the US and emerging markets.

David Kern, chief economist at the British Chambers of Commerce, said the UK's recovery would continue but was likely to be "fragile". "The Monetary Policy Committee should maintain low interest rates for some time," he added.