Solid growth of output and new orders
The UK manufacturing sector experienced further solid growth of production and new orders during February, according to the seasonally adjusted Markit/CIPS Purchasing Managers’ Index (PMI)
Although rates of expansion slowed, they remained well above the respective long-run averages. Increased new business inflows were underpinned by improved domestic and overseas demand, the latter aided by the continued weakness of the sterling exchange rate.
The PMI posted 54.6 in February, a three-month low and down further from December’s two-and-a-half year high. However, it was above its long-run average of 51.6 and nonetheless signalled expansion for the seventh successive month.
February data pointed to a further marked increase in UK manufacturing production.
Business confidence underpinned further increases in employment and purchasing activity during February. Job creation was registered for the seventh consecutive month, with headcounts rising at SMEs and large-scale manufacturers. Purchasing activity increased at an identical rate to December’s two-and-a-half year high.
Rising demand for raw materials led to shortages for some inputs and greater pressure on supplier capacity. Vendor lead times lengthened to the second greatest extent since mid-2011.
Rob Dobson, senior economist at IHS Markit, said: “The big question remains as to whether robust growth can be sustained or whether it will continue to wane in the coming months. The slowdown in new order growth and a drop in backlogs of work suggest output growth may slow further. However, elevated business optimism, continued job creation, a recovery in export orders and rising levels of purchasing all suggest that any easing will be only mild. Indeed, almost 50% of companies expect production to be higher in one year’s time.”
Image courtesy of Epwin.