Yahoo Finance UK manufacturing production hits seven-month high as supply chain pressures ease
UK manufacturing growth improved in February, hitting a seven-month high amid strong demand, fewer material shortages and easing supply chain pressures.
According to the latest data from IHS Markit, the purchasing manufacturing index rose to a three-month high of 58 last month, up from 57.3 in January.
Any reading above 50 indicates growth. The PMI has remained above this neutral mark for 21 successive months.
Faster growth of output, new orders and stocks of purchases and a lessening of supply chain disruptions helped lift the gauge in February, offsetting the impact of slower job creation.
Although input price inflation remained elevated, the latest survey also signalled that cost increases were starting to moderate.
IHS added that manufacturing output and new orders rose across the consumer, intermediate and investment goods sub-industries last month. Higher new work intakes reflected stronger domestic demand, new customer wins, looser COVID restrictions and improved market conditions.
In contrast, new export business decreased for the fifth time in the past six months, amid reports of Brexit-related issues, ongoing pandemic restrictions in trading partners and the loss of business from long lead times.
The outlook for the manufacturing sector remained positive during the period, with almost 64% of survey respondents forecasting that production would increase over the coming 12 months, taking the overall degree of optimism to a six-month high.
Positive sentiment was attributed to market growth, strong order pipelines, lower pandemic-related restrictions and reduced levels of supply-chain disruption, plus input shortages.
The latest survey also showed that employment increased for the fourteenth month in a row, with the rate of expansion above its long-run average.
Jobs growth supported a reduction in backlogs of work, which fell for the first time in 16 months.
Read more: Gas and electricity bills: 6 million families face £320 rise
However, rates of purchase price and output charge inflation remained among the highest on record in February.
Companies reported that increases in a broad range of inputs, including chemicals, electronics, energy, food stuffs and metals, had driven up purchasing costs. These were then passed on in part to clients in the form of higher selling prices.
“While companies maintain a positive outlook for the year ahead, rising headwinds, especially the intensifying geopolitical backdrop, are ratcheting up near-term risks to demand and confidence,” Rob Dobson, director at IHS Markit, said.
“Companies were hit hard by rising transportation, energy and commodity prices, leading to further increases in selling prices. That said, rates of inflation for input costs and output charges eased further.
“Although this easing may have provided some temporary respite, signs that energy and oil prices may stay high is a further cause for concern.”
Read more: European stocks muted as Russia deploys massive convoy to siege Kyiv
Dave Atkinson of Lloyds Bank (LLOY.L) also warned that the Ukraine crisis could impact growth.
“The ripple effect from the situation in Ukraine on international supply chains is naturally creating concern,” he said.
“We should expect to see some stockpiling by companies with supply chains in the region as they seek to mitigate against the fluctuating currencies and raw material costs.”
