Manufacturing production expanded at a robust pace in December, which marked seven months of sustained recovery. That said, the rate of output growth eased from November’s 20-month peak. Survey respondents cited improving order books and efforts to boost inventories. Reflecting this, stocks of finished goods rose at the fastest pace since February 2015.
New order growth eased fractionally since November but remained close to the strongest seen for two years. Anecdotal evidence suggested that improving domestic economic conditions and greater willingness-to-spend among clients had underpinned the latest upturn in new work. December data signalled a continued headwind from subdued export sales, with new orders from abroad increasing at only a marginal pace. Manufacturers cited the strong dollar and intense competition for new work in key export markets.
Job creation picked up further from the near three year-low seen back in April. Moreover, the latest increase in payroll numbers was the steepest recorded since June 2015. Survey respondents commented on efforts to boost operating capacity and relatively upbeat expectations for client demand. Greater workloads also led to a solid upturn in input buying during December and the most marked rise in pre-production stocks for 28 months. Despite stronger demand for inputs, suppliers’ delivery times shortened for the first time since February.
Input price inflation accelerated for the third time in the past four months during December. Moreover, the latest rise in average cost burdens was the sharpest since October 2014, which manufacturers mainly linked to greater raw material prices (especially metals). Factory gate charges also increased at the end of 2016, although the rate of inflation remained only modest.