British manufacturing activity rose to its highest level in more than two years in December, buoyed by a sharp jump in new orders, a closely watched survey showed today.

The CIPS/Markit Purchasing Managers’ Index — which combines new orders, employment and other data to measure operating conditions at the country’s factories — rose to 54.1 last month, a 25-month high and above the consensus forecast of 52.

The figures, coming after a surprise fall to 51.8 in November, suggest Britain’s economy ended the year on a strong footing and will boost expectations that the country emerged from recession in the fourth quarter with positive GDP growth.

New orders rose at their strongest pace for 29 months with manufacturers saying market conditions were beginning to improve and retailers were rebuilding their stocks, although the growth came mainly from the domestic market, with only modest growth in exports.

Rob Dobson, senior economist at Markit, said: “December PMI data signal a positive end to a tumultuous year for UK manufacturers.”

But he added: “The outlook is somewhat clouded given the uncertainty of the timing of fiscal and monetary stimuli withdrawal but the momentum and broad base of the recovery should hopefully aid sustainability.”

The sector continued to shed jobs, for the 20th month in succession, but Markit said that the rate of job losses was the slowest since May 2008 and mainly centred on large companies.

Small and medium-sized firms actually reported a slight increase in staffing levels.

David Noble, the chief executive of the Chartered Institute of Purchasing & Supply, said: “Although a hike in commodity prices pushed up costs, rife competition meant firms were able to increase output charges only slightly.”

Alan Clarke, UK economist at BNP Paribas said: “I’d always seen last month’s drop as a blip in an otherwise rising trend, and today’s numbers really confirm that that was the case. So we’re picking up … reinforcing the case for positive GDP in the fourth quarter.”

Source timesonline