Activity fell slightly in December compared with November but it was still strong enough to beat the expectations of City economists. The Markit/CIPS purchasing managers’ index score for the sector in December was 57.9, beating forecasts of 57.6. In November it was 58.1.
A PMI score above 50 indicates growth, while below points to economic contraction.
Markit said factories had benefited from a slight easing in supply chains. That had taken some of the sting out of increases in the price of raw materials, supply problems and staff shortages.
It added that output had risen, underpinned by fresh orders. Employment had gone up for the 12th successive month as firms addressed a lack of staff, backlogs and increased demand.
However, Markit director Rob Dobson warned that with Omicron rising and restrictions continuing, the backdrop for growth and inflation could change during the first quarter.
He said: “While the uptick in growth is a positive step, the upturn remains subdued compared to the middle of the year, as supply chain constraints and weak export performance constrained attempts to raise production.
“Manufacturers indicated that logistic issues, Brexit difficulties and the possibility of further Covid restrictions at home and overseas had all hit export demand at the end of the year.”
Chartered Institute of Procurement & Supply director Duncan Brock said many issues have manufacturers “on edge”.
He explained: “New variants and potential lockdowns threaten to impede progress but at least the sector ended the last quarter of 2021 on a surer footing.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The manufacturing sector’s recovery has not been slowed by Omicron yet.
“But the variant’s impact will likely build in January, as worker absenteeism rises and global supply chains come under renewed stress.”