British manufacturing is going gangbusters indicating strong growth in 2017.
Point of view
The boost to competitiveness from the weak exchange rate has undoubtedly been a key driver of the recent turnaroundSenior economist, IHS Markit
In December manufacturing in the UK grew at the fastest pace in two-and-a-half-years.
The latest survey of company purchasing managers found the predicted slump following the vote to leave the European Union didn’t materialise – indeed the major decline in the value of the pound helped bring in new orders from both home and abroad.
In addition the rate of hiring of new workers picked up, hitting the fastest rate since October 2015.
Survey compiler IHS Markit said the data indicated manufacturing output rising at a quarterly pace of around 1.5 percent.
“The boost to competitiveness from the weak exchange rate has undoubtedly been a key driver of the recent turnaround, while the domestic market has remained a strong contributor to new business wins,” said Rob Dobson, senior economist at IHS Markit.
The survey did show an increase in cost pressures facing factories – due to higher prices for imported raw materials – something that will increasingly feed into consumer prices next year.
“Of the companies citing a cause of higher costs, 75 percent linked the increase to the exchange rate,” Dobson said.
Britain’s economy looks to be on track to expand by more than two percent this year – faster than almost all other big advanced economies except perhaps the United States.
Ireland shrugs off Brexit
Growth in Irish manufacturing also rose in December to its highest in 17 months, according to surveys carried out for the Investec Manufacturing Purchasing Managers’ Index.
Ireland is widely considered the EU member most at risk from Britain leaving the European Union as the UK is its key trading partner.
New orders in Ireland rose at their fastest pace in almost a year and job creation improved for the third month in a row.
Irish manufacturing growth had slowed immediately before and after Britain’s June referendum.
“Today’s release shows that the sector exited 2016 with a very strong tailwind behind it, supporting our previous contention that the worst of the pressure seen in the aftermath of the UK’s Brexit vote has passed,” Investec Ireland chief economist Philip O’Sullivan said.
“While growth slowed precipitously following the UK’s Brexit vote, the accelerated pace of expansion seen since shows the sector has gotten back on track, presumably aided by the kicker from a strong US dollar and ongoing domestic strengthening.”