By Daniel Hunter
UK manufacturing production and employment continued to expand during February, according to the latest survey by Markit and CIPS.
However, the headwinds faced by the sector were brought into sharper focus by the latest data. Inflows of total new work and export orders were both broadly unchanged following mild gains in January, while cost inflationary pressures rose sharply.
The seasonally adjusted Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) posted 51.2 in February, down slightly from January’s eight-month high of 52.0, to register back-to-back readings above the neutral mark of 50.0.
“UK manufacturers continued to raise production and employment in February, building on the solid foundation seen so far at the start of 2012. This raises hopes that the sector will post an expansion over Q1 as a whole, or at least improve on the disappointing 0.9% contraction seen at the end of last year," Rob Dobson, Senior Economist at Markit and author of the Markit/CIPS Manufacturing PMI, said.
“However, the latest PMI survey brought the headwinds faced by manufacturers into sharper focus. Growth of new work from both domestic and overseas clients stagnated, with reports of weak demand from the Eurozone offsetting new business wins in the US and Asia.
"Cost inflation also resurfaced, picking up sharply on the back of high oil prices and associated increases in the costs of chemicals, energy and transportation. If this combination of rising costs and weak demand persists, sustaining output growth and job creation will become increasingly difficult.”
Manufacturers reported an increase in average input prices for the first time in four months during February. Although the rate of inflation was well below that seen a year ago, the turnaround in the trend was striking. The index tracking input prices posted its steepest month-on-month gain in over 19 years and the second-sharpest in the survey history. Companies reported higher prices for chemicals, feedstocks, metals, oil, plastics and transportation.
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