The UK manufacturing sector experienced further solid growth of production and new orders during February. 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 seasonally adjusted Markit/CIPS Purchasing Managers’ Index (PMI) posted 54.6 in February, a three-month low and down further from December’s two-and-a-half year high. However, the PMI was firmly 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. Growth remained solid across the three product categories – consumer, intermediate and investment goods – with the steepest increase seen in the latter. 

Underpinning the latest increase in output was a further solid expansion of new order volumes. Companies indicated that growth of new business from the domestic market slowed, but noted that this was partly offset by a sharp acceleration in the rate of increase in new export business.

New export orders rose for the ninth successive month in February. Where an increase was reported, companies attributed this to improved sales to clients in mainland Europe, the USA, Asia, Australia, Canada and Ireland.

The ongoing upturn meant manufacturers maintained a positive outlook. Almost 50% expect output to be higher in one year’s time, compared to only 6% anticipating a decline. Optimism was linked to forecasts of improved demand, increased capital investment, company expansion plans and new product releases.

Business confidence underpinned further increases in employment and purchasing activity during February. Job creation was registered for the seventh consecutive month, with head counts 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. 

Supply-chain disruption alongside the cost impact of the weak sterling exchange rate led to a further sharp rise in purchase prices. Input cost inflation eased from January’s record high, but remained among the fastest seen during the survey history. This fed through to the factory gate, with output charges also rising at a rate close to January’s near series-record. 

Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply: “Buoyant economic conditions gave the sector a spring in its step. Levels of new business and overall activity grew for the seventh consecutive month, underpinned mainly by a strong rise in new export orders. The investment goods sector was the biggest winner with the fastest growth in production.

“As a result, manufacturers had the confidence to maintain good levels of job creation reflecting a positive mood around continuing market expansion.

“Any lingering wintry chills however, were attributed to the continuing rise in input prices. This month, the impact of the weak pound combined with a shortage of some raw materials meant cost inflation remained at one of its highest levels since records began. Consequently, suppliers were squeezed and delivery times were lengthened, the latter to the second-greatest extent since May 2011.”