THE TAKEAWAY: UK PMI for manufacturing surprises at 51.4 in December -> UK economy may still decline in Q4 -> Sterling trading higher following fiscal cliff deal

UK manufacturing activity expanded for the first time in 8 months according to Markit’s Purchasing Managers’ Index. The UK PMI for manufacturing was reported at 51.4, beating expectations for a 49.1 survey, and higher than last month’s revised 49.2 survey. A PMI above 50.0 indicates expanding activity in the sector surveyed.

UK manufacturing output increased for the second consecutive month according to Markit. The higher output reflected improved demand from the domestic market, as export demand waned, especially from the Euro-zone. Manufacturing employment declined for the eighth straight month, but Markit said the rate of job loss was negligible.

The Bank of England recently reported that it is not confident the positive growth from Q3 will continue in Q4. Markit Senior Economist Rob Dobson said, “This does little to change the view that the sector contracted over the fourth quarter as a whole following the temporary growth surge of 0.7% in the third quarter.

The higher than expected PMI did not have a significant effect on Sterling trading. GBPUSD is up about 50 points from today’s open following news of the deal to avert the US fiscal cliff. A year long high at 1.6309 was broken earlier in the session and could now provide support.

GBPUSD Daily: January 2, 2013

UK_Manufacturing_Activity_Expands_for_the_First_Time_in_8_Months_body_gbpusd.png, Forex News: UK Manufacturing Activity Expands for the First Time in 8 Months