The PMI sat at 55.2 in February - an eight-month low with further ground lost after hitting a 51-month high last November.
Market says that manufacturing production increased at the slowest pace for 11 months in February, with decelerations seen across the consumer, intermediate and investment goods sectors.
Brighter news was, however, provided by the trend in new orders, which rose at a faster pace than in January. Companies indicated that domestic demand strengthened, while new export business rose at a solid pace.
New export business also rose for the 22nd successive month in February. However, the overall pace of expansion eased to a four-month low.
In addition, UK manufacturers’ outlook remained positive. Almost 56% of companies forecast that output would be higher in one year’s time, compared to only 6% expecting a decline. Business confidence was linked to planned expansions, rising new order inflows, new product launches, investment activity and marketing efforts.
Employment also rose for the 19th month in a row, with the rate of expansion the second-fastest since mid-2014. The increase in capacity aided efforts to reduce backlogs of work, which fell for the second straight 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.
Average input costs also rose sharply during February, as manufacturers experienced price increases for a broad range of commodities and raw materials. Part of the increase in purchasing costs was passed on to clients in the form of higher output charges.
Explains IHS Markit director Rob Dobson: “The February survey provided mixed signals on the health of the UK manufacturing sector. The PMI’s Output Index fell to its second-lowest level since the EU referendum and, based on its past relationship with official ONS data, is consistent with only a subdued 0.4% quarterly pace of growth in production volumes. This would represent a marked downshift from the 1.3% increase signalled for the final quarter of 2017, providing a further brake on the rate of expansion in the wider economy.
“However, positive news was provided by other survey indicators that are suggesting output growth may revive in the coming months. New orders showed the largest monthly gain since November and are outpacing the rate of growth in output to one of the greatest extents in more than a decade. Stocks of finished goods fell, raising the forward looking new orders to inventory ratio, while companies remained sufficiently confident in the outlook to take on more staff.
“Supply-chain delays are also reining in production growth. Any easing in these constraints would not only provide a further boost to growth, but also ease some of the pressure on input costs. Price inflation currently remains stubbornly high, as suppliers pass on higher commodity and raw material costs in part caused by demand outpacing supply. If this feeds into rising consumer prices, household spending could take a further knock in coming months.”
