British manufacturing roared back into life at the start of the year with official figures showing manufacturing industries 6.8 per cent stronger in January.
The figures from the Office for National Statistics revealed electricals and electronics soaring, with production of batteries, lighting and computers leading the way. The figures were just ahead of the resurgent British motor industry.
The manufacturing statistics show industry expanding at its fastest rate in ten months and the biggest single year-on-year leap since 1994, the last time the country was coming out of a protracted recession. The bounce back outstripped economists’ best predictions.
The figures also appear to indicate that the fall back reported in December was more heavily weather-related than accounted after the large falls of snow which paralysed the country during the month.
“Manufacturers are currently benefiting from decent orders both at home and particularly from overseas, the competitive level of the pound and an ongoing rebuilding of stocks after they had been slashed during the recession,” said Howard Archer, chief economist at IHS Global Insight. “Manufacturers look well placed for robust expansion in the first quarter and very possibly beyond but the key question is will they be able to sustain this performance as we get deeper into 2011 as stock rebuilding draws to a close and tighter fiscal policy weighs down on domestic demand.”
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But he warned: “There is the risk that problems in the eurozone could escalate and dampen foreign orders. In addition, high oil prices and surging input costs are an increasing threat to manufacturing activity by substantially squeezing companies’ margins and putting pressure on them to raise prices and risk losing business.”
Graeme Allinson, head of manufacturing at Barclays Corporate, called the figures “outstanding”, adding: “They point to a manufacturing recovery that is both strong and sustainable.”
Mr Allinson also sounded a note of caution: “It remains somewhat disappointing that we are still seeing little in the way of major capex or M&A activity amongst Britain’s manufacturing sector this year. While a few manufacturers are investing some of the cash they have accumulated over the past 18 months, there is still very little in the way of international acquisitions, new plant openings or private equity activity that we would expect to follow the wave of positive sentiment seen in the industry over the past year.”