Roundup: British manufacturing PMI rises in Jan, input costs down

The British manufacturing purchasing managers' index (PMI), a gauge of industry activities, edged up to 53.0 in January this year from the revised 52.7 in December 2014, Markit Economics said on Monday.

Lower input costs, pushed down by the oil price slump, fueled manufacturing activities.

FIRMER FOOTING

The data was above the market estimates consensus of 52.8, and has remained above the neutral 50.0 mark since April 2013. A figure above 50 suggests that the sector is growing.

British manufacturing started 2015 on firm footing, as the growth of output and new orders ticked higher following the slowdown seen through much of the latter half of 2014, said the London-based market researcher.

Manufacturing output expanded for the 23rd consecutive month in January, underpinned by a further increase in new incoming orders, and the domestic market remained the prime driver of improved new orders inflows, said Markit.

New businesses from overseas and job creation in the industry also saw growth in January, and average input costs encountered a steep drop over the same period, data showed.

Rob Dobson, senior economist at Markit, said: "The big mover in the latest survey was the input prices index, as the recent slump in oil prices saw manufacturers' purchasing costs fall at one of the fastest rates seen over the past 16 years."

Maeve Johnson, UK Economist at Capital Economics, said in a note: "Lower oil prices should provide a much-needed windfall for the treasury and drive the UK's recovery forward, even if investment takes a hit in the near term."

The British economic forecaster expects a robust GDP growth of 3 percent in 2015.

INTEREST RATE BETS

The eye-catching drop of production costs reignited the debate on whether the Bank of England's (BoE) would change interest rates.

Waning inflationary pressures will provide the central bank with leeway to push back the first rate increase to late-2015 at the earliest, Dobson estimates.

Latest figures showed that British consumer prices index (CPI) grew by 0.5 percent in the year to December 2014, far below the BoE's target of 2 percent.

Martin Beck, senior economic adviser to the EY ITEM Club, commented that given the BoE's concerns that low inflation could become entrenched, and disinflation pressures make it highly likely that interest rates will stay at 0.5 percent throughout this year.

"There is also an increasing possibility that the status quo will be maintained well into 2016 too," he said. Endit