United Kingdom: UK manufacturing sector stays solid in February
March 1, 2017
The manufacturing IHS Markit/CIPS Purchasing Managers’ Index (PMI) dipped from a revised 55.7 in January (previously reported: 55.9) to 54.6 in February. Despite undershooting analysts’ expectations, the index remains comfortably above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for seven consecutive months.
February’s healthy reading was underpinned by continued growth in output and new orders. Both indicators expanded above their long-run average rates, albeit at a slower pace than in the previous month. British firms enjoyed improved domestic and external demand, with the latter benefiting from the weaker exchange rate. The expansion remained broad based, with growth in the production of consumer, intermediate and investment goods. In response to the buoyant mood in the manufacturing sector, firms took on more workers last month. On the downside, input prices continued to rise at near record levels, driven by weaker sterling and supply-chain disruption as a result of shortages of some inputs.
According to Rob Dobson, Senior Economist at IHS Markit, “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.”
Author: Oliver Reynolds, Economist