By Claire West

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, comments on PMI manufacturing figures:

The manufacturing sector remains in very good health
Very strong growth in manufacturing output is likely in Q1
While rising manufacturing employment is encouraging, it is a small sector and cannot support the labour market on its own.

“It’s encouraging that the headline index held steady at January's record high - one could have reasonably assumed that January's figure had been boosted by some catch up after the snow. These figures imply growth in manufacturing output of well over 1% in Q1 and, with the services sector catching up on output delayed by the snow, we could easily see GDP rebound by 1% over the quarter.

“Once again there is strength across the survey and the very strong growth in new orders, particularly from abroad, promises further strong output growth over the coming months.

“Respondents reported a record increase in manufacturing employment in February which is good news for a sector where employment levels have been persistently falling for several decades. But we shouldn't get too carried away about what this means for the wider labour market outlook - manufacturing now accounts for less than 9% of UK employment so manufacturing job creation is not going be able to offset the likely decline in public sector employment on its own. If unemployment is not to rise this year then private services firms will need to step up their hiring, alongside the improvement in manufacturing job prospects.

“The only fly in the ointment from this survey is the further acceleration in the output prices balance. Given the extent to which input prices are rising, it is little surprise that manufacturers are having to increase prices too. However, given that the MPC seem to be getting increasingly jittery, these results will increase concerns that others might soon join Spencer Dale in jumping into the hawks camp.

“Manufacturing has been leading the recovery for some time now and we have few concerns about its ability to continue to grow strongly this year, particularly given the enduring strength of export demand. The key indicator for us this week will be Thursday's services PMI - that's the area that has been struggling over the past six months. Given that it looked to have been more heavily affected by the snow, there is probably a greater chance that we will see that balance slip backwards in February.”