January data revealed a renewed acceleration in output growth among manufacturing firms, with the rate of expansion reaching its strongest for 22 months. Survey respondents noted that greater production volumes had been underpinned by improved client demand and efforts to boost inventory levels at the start of 2017. Reflecting this, latest data signalled the fastest accumulation of post-production stocks for almost ten years.
New business growth picked up again in January, thereby signalling a sustained turnaround from the soft patch seen during the third quarter of 2016. Anecdotal evidence indicated that stronger order books reflected an improved economic backdrop and a corresponding rise in clients’ willingness to spend. However, export sales growth remained only marginal at the start of 2017, suggesting a continued drag on external demand from the strong dollar.
Input buying gathered momentum during January, largely in response to increased production schedules. The latest upturn in purchasing activity was the fastest since March 2015, which was in line with the trends seen for output and new business intakes. The latest survey also pointed to another rise in stocks of purchases and a solid expansion of workforce numbers.
Meanwhile, manufacturers indicated that cost pressures intensified in January, driven by higher prices for a range of raw materials (particularly oil and metals). The overall rate of input cost inflation was the fastest for almost two-and-a-half years, but manufacturers’ factory gate charges increased only moderately at the start of 2017.