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British manufacturing growth was slower than expected in February, according to a closely watched index, but nonetheless marked a seventh consecutive month of expansion.
Markit’s monthly purchasing managers’ survey of UK factories, which measures output, employment and expectations in the sector, hit 54.6 in February, lower than expectations of a 55.8 level and down from January’s 55.9 reading.
But Markit said that despite the slower rate of gains in the index, the UK manufacturing sector experienced “further solid growth” of production and new orders in February, with growth rates still well above long-term averages and recent months producing upbeat results. December’s reading was its highest in more than two years.
The weaker pound helped an improvement in overseas demand, Markit said, with a “sharp acceleration” in the rate of increase of new export business offsetting a slowdown in growth of new domestic business.
Manufacturers also had an optimistic outlook overall, with almost 50 per cent expecting output to be higher in a year’s time, compared to only 6 per cent anticipating a decline.
Rob Dobson, senior economist at IHS Markit, said:
The latest PMI signals that the UK manufacturing sector continued its solid start to the year. Although rates of expansion in output and new business lost impetus in February, growth remained comfortably above the long-run averages.
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.
On the price front, input costs and output charges are still rising at near survey record rates. However, the recent easing in both suggests that the impact of the weak sterling exchange rate on prices is starting to subside, providing welcome respite with regards to pipeline inflationary pressures.