The upturn of operating conditions in the UK manufacturing economy continued in January, according to data from the latest CIPS/RBS survey of the sector. At 51.7, from an upwardly revised figure of 51.3 in December, the seasonally adjusted Purchasing Managers' Index (PMI) posted a reading above the 50.0 mark for the sixth successive month. However, the rate of overall expansion signalled by the PMI has been, at best, only moderate during this period.

Manufacturing output continued to rise in January. The rate of expansion remained solid and picked up slightly since the previous month. Where a rise in output was recorded, this was generally linked to an improvement in underlying demand - particularly from domestic clients - while firms also benefited from improved production techniques.

At 46.5 in January, the seasonally adjusted Employment Index indicated that job losses were recorded for the tenth successive month in January, partly in order to offset rising input prices. There were also reports that workforce levels had been lowered to reduce excess capacity. The rate of decline in staffing levels was the sharpest since last August.

Roy Ayliffe, Director of Professional Practice at CIPS, said: "Purchasing managers in the UK manufacturing sector continue to face significant challenges with 2006 opening with downcast conditions. Factory output remained solid and new orders rose in response to successful marketing initiatives. However, the New Year saw the export market enter into decline in the face of strong competition from cheaper overseas producers. In response to difficult operating conditions, manufacturers continued to cut jobs and attempted to pass on costs to customers - a strategy which was only partly successful."