UK manufacturing industry starts 2018 with growth and costs blow

Output in Britain's manufacturing sector has unexpectedly slipped at the start of the year as the industry grappled with a double-whammy hit of slowing growth and escalating costs.

The closely watched Markit/CIPS UK Manufacturing purchasing managers' index (PMI) showed a reading of 55.3 last month, down from 56.2 in December, with economists expecting a figure of 56.5.

A reading above 50 indicates growth.

Despite chalking up another solid rise, the rate of expansion drifted to a six-month low and came in shy of November's heady climb when the sector reached its highest level for more than four years.

January's slowdown was coupled with biting price pressures, as firms were confronted by a perfect storm of increased input demand and a shortage of raw materials, causing purchasing prices to hit an 11-month high.

Rob Dobson, director at IHS Markit, said: "Encouragingly, despite the slowdown, the latest survey is consistent with production rising at a solid quarterly rate of around 0.6% in January, with jobs also being added at a faster pace.

"However, output growth has slowed sharply since last November's high, and the more forward-looking new orders index has slipped to a seven-month low.

"The trend in demand will need to strengthen in the near term to prevent further growth momentum being lost in the coming months."

Sterling was little moved by the announcement, trading up 0.5% at $1.425.