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Fastest manufacturing output growth since April 2019 in UK

Christian Fernsby |
Manufacturing production growth accelerated to its strongest for 10 months in February, helping to offset a slight loss of momentum in the service economy, according to February data from the IHS Markit / CIPS Flash UK Composite PMI.

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The seasonally adjusted IHS Markit / CIPS Flash UK Composite Output Index was unchanged at 53.3 in February and comfortably above the 50.0 threshold that separates expansion from contraction.

Moreover, the latest reading pointed to the joint-fastest expansion of private sector output since September 2018 (equalling that recorded in January).

Survey respondents noted that receding political uncertainty since the general election continued to translate into higher business activity and greater willingness to spend among clients.

That said, the overall rate of new order growth eased from the 19-month peak seen in January amid a weaker expansion across the service economy.

There were a number of reports from service providers that the COVID-19 outbreak had weighed on overseas bookings and resulted in the cancellation of some orders from clients in Asia, particularly those based in mainland China.

Manufactures also commented on a headwind from extended shutdowns in China, with stocks of inputs falling at the fastest pace for over seven years and vendor lead times lengthening to the greatest extent since March 2019.

Moreover, the sevenpoint drop in the suppliers' delivery times index since January signalled the largest month-on-month slide in supply chain Comment performance since the survey began in 1992, exceeding the previous record seen during the UK fuel protests in September 2000.

Despite early signs of disruptions to export sales and business operations from the COVID-19 outbreak, latest data indicated that output growth expectations across the UK private sector edged up slightly since January and remained the highest since June 2015.

Service providers are more optimistic about the year ahead business outlook than manufacturing companies, but in each case there was little-change since the start of 2020.

Staffing numbers picked up for the third month running across the private sector economy, although the rate of job creation was only marginal in February and the weakest over this period.

Signs of a rebound in client demand and the need to pass on higher operating costs led to a robust and accelerated rise in average prices charged by private sector firms.

February data indicated that the overall rate of output charge inflation picked up to its fastest since June 2018.

In contrast, the rate of input cost inflation moderated since January and remained weaker than seen on average in 2019.

The seasonally adjusted IHS Markit/CIPS Flash UK Manufacturing Purchasing Managers’ Index (PMI) registered 51.9 in February, up from 50.0 in January, to signal the strongest improvement in overall business conditions since April 2019.

Latest data indicated that production growth also accelerated to the fastest for 10 months in February.

The solid expansion of manufacturing output was supported by a sustained rebound in client spending since the start of 2020, with the latest survey pointing to the fastest rise in new work since March 2019.

Manufacturers often noted rising demand from the US and Europe, but there were also reports that extended production stoppages in China following the COVID-19 outbreak had weighed on export sales and the receipt of manufacturing components from suppliers.

February data pointed to the sharpest month-onmonth drop in the suppliers' delivery times index in nearly three decades of data collection, while pre-production inventories fell to the greatest extent since December 2012.

At 53.3 in February, the seasonally adjusted IHS Markit/CIPS Flash UK Services PMI Business Activity Index dropped from 53.9 in January but remained well above the crucial 50.0 nochange value.

Moreover, the latest reading was the secondhighest since September 2018.

Anecdotal evidence cited greater willingness-to-spend among clients and a general upturn in sales enquires since the general election.

That said, the overall pace of new business growth eased from January's 19-month peak.

The slowdown partly reflected weaker demand from abroad, as signalled by a renewed fall in new export orders during February.

Companies reporting a fall in overseas sales often cited a marked reduction in new work from clients in Asia. â– 

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