(Corrects last paragraph to show 2017, not next year)
LONDON Jan 3 British manufacturing growth
climbed to a two-and-a-half-year high last month, fuelled by new
orders from both home and abroad and adding to signs the economy
ended 2016 strongly, a survey showed on Tuesday.
The Markit/CIPS UK Manufacturing Purchasing Managers Index
(PMI) rose to 56.1, the strongest reading since June 2014, from
53.6 in November. That exceeded all forecasts in a Reuters poll,
which pointed to a decline to 53.1.
Britain's economy has fared much better than many economists
predicted in the aftermath of June's vote to leave the European
Union, with consumer spending strong and companies continuing to
The manufacturing PMI showed domestic and export order books
grew, but so did cost pressures facing factories - something
that will increasingly feed into consumer prices next year.
Survey compiler IHS Markit said the survey was consistent
with manufacturing output rising at a quarterly pace of around
"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
Dobson added that higher costs were the flip side of the
pound's fall since June's Brexit vote, which has left it down
around 10 percent on a trade-weighted basis.
"Of the companies citing a cause of higher costs, 75 percent
linked the increase to the exchange rate," Dobson said.
A separate survey of financial officers last week showed
business morale has recovered completely its plunge after the
Brexit vote. However, companies are reluctant to spend more
because of uncertainty about the economic outlook.
IHS Markit said investment and intermediate goods
manufacturers performed particularly well in December, which
could augur well for investment more broadly.
Manufacturers hired staff at the fastest rate since October
Britain's economy looks on track to expand by more than 2
percent this year - faster than almost all other big advanced
economies except perhaps the United States.
Economists polled by Reuters expect Britain's growth rate to
more than halve in 2017 to 1.1 percent.
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(Reporting by Andy Bruce; Editing by Larry King)