Although input price inflation remained elevated, the latest survey also signalled that cost increases were starting to moderate. The PMI rose to a three-month high of 58.0 in February, up from 57.3 in January.
The PMI has remained above the neutral 50.0 mark for 21 successive months. Faster growth of output, new orders and stocks of purchases all helped lift the PMI level in February, offsetting the impact of slower job creation and a lessening of supply chain disruptions.
Manufacturing output and new orders rose across the consumer, intermediate and investment goods subindustries in February. Higher new work intakes reflected stronger domestic demand, new customer wins, looser COVID restrictions and improved market conditions.
In contrast, new export business decreased for the fifth time in the past six months, amid reports of Brexit-related issues, ongoing pandemic restrictions in trading partners and the loss of business from long lead times. The outlook for the manufacturing sector remained positive in February.
Almost 64% of survey respondents forecast that production would increase over the coming 12 months, taking the overall degree of optimism to a six-month high. Positive sentiment was attributed to market growth, strong order pipelines, lower pandemic-related restrictions and reduced levels of supply-chain disruption, plus input shortages.
Improved output and new order growth, alongside rising business optimism, underpinned job creation in February. Employment increased for the fourteenth month in a row, with the rate of expansion above its long-run average (albeit weaker than in January). Jobs growth supported a reduction in backlogs of work, which fell for the first time in 16 months.
Average vendor lead times lengthened for the thirty-second consecutive month in February. There were signs that supply chain disruptions were passed their peak, however. Although the incidence of delivery delays remained high, it was the least severe since November 2020.
Companies continued to guard against a re-emergence of supply chain pressures in February, as highlighted by rising volumes of input purchasing and the further build-up of stocks of raw materials. Inventories of finished goods also rose slightly for the first time in over two years. Rates of purchase price and output charge inflation remained among the highest on record in February.
Companies reported that increases in a broad range of inputs – including chemicals, electronics, energy, food stuffs and metals – had driven up purchasing costs. These were then passed on (in part) to clients in the form of higher selling prices. That said, rates of increase in both price measures eased further from recent highs.