British and eurozone manufacturing soars in December

Manufacturing in Britain and the troubled eurozone soared in December, according to Markit, with noticeable improvements even in the eurozone periphery.

Markit’s British purchasing managers’ index (PMI) hit a 16-year high. Manufacturing new orders and production grew at the highest rate since May. Export orders rose at their fastest pace since April’s record number. Employment in the sector also increased.

However, manufacturers’ costs continued to rise and were passed on partly to consumers, stoking fears of higher inflation. Markit says this could put additional pressure on the Bank of England’s Monetary Policy Committee to raise interest rates.

In the eurozone, the Markit final manufacturing PMI posted its highest level since its 46-month peak in April. (article continues below)

Although Markit says strong German growth led the rise, activity accelerated in troubled periphery countries such as Spain and Ireland. The rate of decline in Greece also slowed.

Chris Williamson, the chief economist at Markit, says: “The data therefore suggest that the manufacturing recovery may be broadening out to help lift economic growth outside of the French-German core in early 2011.”