Growth slows but outlook remains positive for UK manufacturers

Growth for Britain’s manufacturers has slowed to an eight-month low although the overall situation remains positive with strong activity and order books recorded in February.


These are two of the findings from the latest Markit/CIPS Purchasing Managers’ Index (PMI), which brought in a score of 55.2 for February, a figure that indicates growth, albeit at a slower pace compared to 58.2 in November 2017.

The slowdown was seen across the consumer, intermediate and investment goods sectors. New orders rose at a faster pace than in January. Companies indicated that domestic demand strengthened, while new export business rose at a more modest pace.

New export business increased for the twenty-second successive month in February, which was linked to improved sales in the USA, China, Europe, Brazil and East Asia. The overall pace of expansion, however, eased to a four-month low.

UK manufacturers’ outlook also remained positive with nearly 56 per cent of companies forecasting that output would be higher in one year’s time, compared to six per cent expecting a decline.

Business confidence was linked to planned expansions, rising new order inflows, new product launches, investment activity and marketing efforts.

According to Markit/CIPS, the combination of ongoing expansion and expected future output growth encouraged job creation at UK manufacturers in February with employment rising for the nineteenth month in a row. The increase in capacity is said to have aided efforts to reduce backlogs of work, which fell for the second consecutive month.

Rising demand also underpinned a further increase in manufacturers’ purchasing activity during February. However, the rate of increase in input buying volumes slowed to an eight-month low. Companies indicated that rising demand for inputs was causing shortages to develop, leading to further lengthening of average vendor lead times and higher prices charged by suppliers.

Average input costs rose sharply during February, as manufacturers experienced price increases for commodities and raw materials. Part of the increase in purchasing costs was passed on to clients in the form of higher output charges.

Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply: “The biggest news in February was that despite the limited output, employment levels rose at the second fastest rate since the middle of 2014, fuelled largely by optimism from respondents that things would get better. Indeed, the continued rise in export orders and an uplift in new orders from the domestic market provided evidence that the foundations for continued growth were still buoyant.

“The concern however, will be whether the hard-won gains over these last few months will continue to wither away. If supply chains are still challenged, rising costs for manufacturers are cascaded to consumers and Brexit uncertainty returns, the manufacturing sector may not have the fuel necessary to power itself into a winning position towards the end of the first quarter.”