UK manufacturing growth hits seven-month high

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UK manufacturing growth hit a seven-month high in February, underpinned by stronger domestic demand, fewer raw material shortages and easing global supply chain pressures.
The IHS Markit/CIPS manufacturing purchasing managers’ index rose to a three-month high 58.0 from 57.3 in January, staying above the 50.0 mark that separates contraction from expansion for 21 consecutive months.

The survey found that faster growth of output, new orders and stocks of purchases helped to offset the impact of slower job creation and a lessening of supply chain disruptions.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “February saw a welcome uplift in manufacturing activity as the end of lockdown restrictions and more improvements in supply chain performance fuelled output growth momentum towards a seven-month high.

“Domestic customers picked up the pace with stronger pipelines of new work, which was in stark contrast to another softening in overseas orders and the fifth drop in six months. Survey respondents cited Brexit obstacles and an overspill of pandemic supply issues acting as a brake on export opportunities with clients seeking alternative sources.”

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said demand is likely to eventually weaken in response to higher prices.

“Indeed, the survey suggests that manufacturers are continuing to pass on higher costs; the output price index remained in the top 5% of previous readings, despite edging down to 69.8, from 70.9.

“Demand from some businesses for manufactured goods also likely will ease once they have rebuilt their inventory. Meanwhile, the looming squeeze on households’ disposable income from rising energy prices and higher taxes suggests that demand for household goods will weaken later this year. Accordingly, we expect the recovery in manufacturing output to flatten off in the second half of this year.”

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