Investing.com - The recovery in U.K. factory activity eased slightly in January, according to data released on Monday, but new orders surged, fuelling hopes for a broad based recovery in manufacturing.
Markit said the U.K. manufacturing purchasing managers’ index came in at 56.7 for January, down from 57.2 in December and below estimates for a reading of 57.0.
Although the rate of the expansion was the slowest in three months the index was still well above the series average of 51.3, indicating that the economy had a strong start to the year.
"Although the pace of output expansion has cooled slightly in recent months, growth is still tracking at one of the highest rates in the 22-year survey history," said Rob Dobson, senior economist at Markit.
Strong manufacturing growth was maintained in January as new orders surged on the back of increased domestic demand and rising levels of new business from overseas.
New exports orders rose to the highest levels in nearly three years, the report said, driven by improved demand from North America, Europe, Asia, Brazil and the Middle East.
The increase in new orders also led to further job creation. January saw employment increase for the ninth successive month, with the rate of jobs growth remaining close to November’s two-and-a-half year high.
“The ongoing improvement in the labour market in January adds further to the prospect of unemployment dropping below 7% imminently,” said Mr. Dobson added.
Data last month showed that the U.K. unemployment rate dropped to 7.1% in the three months to November, to stand just above the 7% threshold at which the Bank of England has said it would start to consider raising interest rates. BoE Governor Mark Carney has since indicated that rate hikes are not imminent.
The BoE is to hold its monthly policy setting meeting on Thursday. The bank is not expected to announce any changes to monetary policy but the decision will be closely watched in case it updates its forward guidance on rates.