The PMI sat at 56.3 in December – down from November’s 51-month high of 58.2 – and above the neutral mark of 50.0.
Markit said that manufacturing output and new orders both expanded throughout the past 17 months, with companies reporting that production was scaled up in response to solid inflows of new work and the launch of new product lines.
Part of the increase in new business reflected a solid increase in new export sales, with demand improving from clients in Europe, the USA, China and the Middle East.
Rising intakes of new work also tested capacity, leading to a modest increase in outstanding business, and in turn, encouraged companies to raise employment.
Additional findings show that the rate of increase in input costs eased to a four-month low in December, but remained marked overall. Companies linker higher costs to rising raw material prices, input shortages, suppliers raising their prices and the exchange rate.
Part of the increase in purchase prices was passed on in the form of higher output charges in December. Selling prices rose for the twentieth successive month but UK manufacturers also maintained a positive outlook in December, with close to 54% of companies reporting that they expect production to rise over the coming year.
IHS Markit director Rob Dobson said: “UK manufacturing ended 2017 on a positive footing. Although growth of output and new orders moderated during December, rates of expansion remained comfortably above long-term trend rates. The sector has therefore broadly maintained its solid boost to broader economic expansion in the fourth quarter. The outlook is also reasonably bright, with over 50% of companies expecting production to be higher one year from now.
“The main growth engines were the intermediate and investment goods sectors during December, suggesting resilient business-to-business demand and capital spending trends, albeit in part due to rising exports. Growth in the consumer goods sector remained weak in comparison and was the only sub-industry to see output expand at a slower pace than November.
“Rates of inflation in input costs and selling prices both moderated in December. Although still running at elevated levels, this at least provides signs that the recent surge in price inflation is starting to abate. This trend should continue at the start of 2018, as supply-chain pressures hopefully ease further.”
