Manufacturing growth slows as cost inflation fuels factory gate price surge
UK manufacturing growth eased to its slowest pace in three months in February, while factory gate prices continued to surge amid cost pressures fuelled by sterling’s weakness following the Brexit vote, a survey shows.
The Chartered Institute of Procurement & Supply’s latest purchasing managers’ index for UK manufacturing, a measure of activity which includes changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased, fell from 55.7 in January to 54.6lastmonthonaseasonallyadjusted basis.
However, it remained comfortably above the level of 50 deemed to separate expansion from contraction. Survey compiler IHS Markit said the report was signalling quarterly manufacturing output growth close to 1.5 per cent.
The output index for UK manufacturing dropped from 60.1 in February to 56.6 last month, and the new orders index fell from 57.4 to 56.3, signalling declines in the rates of increase in both cases.
However, a rise in the export orders index from 51 to 54.6 signalled an acceleration of the pace of increase of incoming business from overseas, following a sharp deceleration in January.
The employment index was flat at 51.1, signalling continuing modest net recruitment by UK manufacturers.
CIPS noted the rate of UK manufacturers’ input cost inflation remained among the highest in the survey’s history.
Factory gate prices also rose at a pace not far off the fastest in the history of the survey.
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 per cent of companies expect production to be higher in one year’s time.”