Inflationary pressures also eased further, with costs rising to the least marked extent since July 2020. The PMI posted 49.3 in February, up from 47.0 in January and the earlier flash estimate (49.2).
Although the PMI remained below the neutral mark of 50.0 for the seventh successive month, this was the best reading during that sequence. Manufacturing production rose for the first time in eight months, albeit only slightly.
The increase was underpinned by signs of firming client demand, with the two sub-sectors to see production rise – consumer and investment goods – the only industries to see new orders increase. The downturn continued at intermediate goods producers, but rates of decline in output and new business eased to seven-month lows.
February saw the overall level of new work received decrease for the ninth consecutive month. However, the trend showed further signs of stabilising, as the rate of contraction was only mild and the weakest during that sequence. Companies reporting lower new business intakes mentioned the cost of living crisis and weaker export order intakes. In contrast, those seeing an increase reported stronger client confidence and signs of economic stabilisation\recovery.
The trend in new export business also showed signs of resilience in February. Although new export orders decreased for the thirteenth month in a row, the rate of contraction eased sharply to its weakest since March 2022.
On the downside, companies reported lower intakes of new work from key markets such as the US, mainland Europe and China. However, several also noted that a revival in global economic conditions and the reopening of China from COVID restrictions had a beneficial impact on overseas demand.
The outlook for the manufacturing sector also strengthened in February. Business sentiment improved for the third month running and to its highest level in a year. Almost 60% of companies forecast production would be higher in 12 months' time, compared to only 10% anticipating a downturn.
The positive outlook mainly reflected expectations of improved economic conditions, new product launches, planned investment and reduced supply chain issues. February saw average vendor lead times shorten for the first time since June 2019.
Although sub-sector data signalled that the improvement was mainly centred on the intermediate goods category, there were also signs of supply chain disruptions abating in the consumer and investment goods industries (both saw delivery times increase to lesser
extents).
Companies reported improvements in material availability and vendor capacity. Reduced pressure on supply chains filtered through to the trend in input prices during February. Although average purchasing costs rose again, the rate of inflation eased for the fifth month running and to its lowest since July 2020.
There remained widespread reports of price increases nonetheless, including for items such as electronics, energy, food stuffs, metals, packaging and timber. Higher costs resulted in increased selling prices (albeit the weakest rise in over two years).
Manufacturing employment decreased for the fifth successive month in February. Purchasing activity, stocks of inputs and finished goods inventory also fell, in many cases due to efforts to control costs, minimise holdings and dismantle safety stocks.
Maddie Walker, Industry X lead for Accenture in the UK, said: “It’s reassuring to see signs of growth returning to UK manufacturing after the gloom which dominated the sector last year. News that the UK may avoid a recession has buoyed the sector and recent foreign investments are a vote of confidence in the UK’s manufacturing capabilities for the future.
"As economic revival continues, we will hopefully see further growth in the coming months. While the road to full recovery will be a long one, it will take continued investment in the right digital technologies, alongside ensuring new recruits have the right skills for modern manufacturing. It’s this that will help bolster the sector’s resilience and ensure this growth is sustained.”
