Instant View - Manufacturing PMI jumps to fifteen-month high in December

LONDON Wed Jan 2, 2013 9:57am GMT

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LONDON (Reuters) - British factory activity jumped unexpectedly in December to grow at its fastest pace since September 2011, a survey showed on Wednesday, raising the chance that the economy eked out growth at the end of 2012.

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- Highest headline manufacturing PMI index since September 2011

- Highest output component since April 2011

- Highest new orders component since March 2011

- Highest new export orders component since September 2012

- Highest input prices index since March 2012

- Highest output prices index since April 2012

- Highest employment index since August 2012

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ECONOMISTS' COMMENTS

BRIAN HILLIARD, SOCIETE GENERALE

"A belated Christmas present. The most encouraging feature was the surge in the output index... Export orders are still down, so that would suggest that it's domestic demand which is picking up, which is surprising if true.

"So it's a welcome surprise, it's difficult to know what's driving it.

"The biggest uncertainty about Q4 (GDP) is going to be construction numbers. The October (official non-seasonally adjusted) figures suggested that we could see a bounce, but it's very early days. It's a very uncertain number. Barring distortions to construction, even with a slightly more encouraging manufacturing output number, it (Q4 GDP) should be around flat."

GEORGE BUCKLEY, DEUTSCHE BANK

"The jump in the output index is very encouraging, to 54. Obviously there's a risk that it might not be sustained but if it is, then we are moving, it would suggest, from a period of negative growth in the final quarter of last year to positive growth again.

"It's obviously very difficult to read, because we don't know what the services survey did but if you plot it against GDP, it is consistent with an improvement into positive territory, so it's encouraging in that sense."

ROSS WALKER, RBS

"The big question is over the official manufacturing output figures; we've seen pronounced weakness in the official manufacturing figures since the summer.

"The fact that survey figures are easing up a little bit means we may see an improvement in the official figures, but it is not enough to prevent a sizeable fall (in manufacturing) in the fourth quarter."

ROB WOOD, BERENBERG BANK

"The sector seems to be showing some signs of improvement - probably as the euro zone crisis is easing a little bit and Chinese growth is bottoming out.

"But the big picture is that the UK economy has been bouncing along the bottom over the last year.

"Today's figures point to stabilisation rather than a return to growth."

ROB DOBSON, MARKIT

"UK manufacturing exited 2012 on a positive note, with December's PMI data signalling a reassuringly solid return to growth for the sector. However, this does little to change the view that the sector contracted over the fourth quarter as a whole, following the temporary growth surge of 0.7 percent in the third quarter.

"The domestic market remained the main spur for growth of production and new orders in December, although there are also signs that global trade flows are stabilising as China and the U.S. strengthen and the downturn in the euro zone eases. If the recovery in overseas markets continues to build at the start of 2013, this would be of major benefit to UK exporters."

"The latest survey also showed that manufacturers remain on a cost-cautious footing, leading to lower levels of purchasing, the running-down of inventories and a reluctance to increase payroll numbers.

"However, there are increasing signs of firms starting to move out of this cost-cutting mode, though it is clear that the outlook remains far from certain.

"Business confidence among producers therefore remains fragile and could easily be derailed by setbacks in key export markets, notably any resurgence of the euro zone debt crisis."

(Reporting by UK economics team)

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