Production and output levels both rose in February as the UK manufacturing sector continues its robust start to 2017, according to the latest Markit/CIPS Purchasing Managers’ Index (PMI).
Although February’s score of 54.6 is a drop from January’s recording of 55.7, showing a slowing of expansion, the result is still well above the average UK manufacturing PMI of 51.6.
According to Markit/CIPS, increased business inflows were underpinned by improved demand, both domestic and overseas. The latter being no doubt aided by the sterling exchange rates continued depreciation.
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New export orders rose for the ninth consecutive month in February, with an increase reported in sales volumes to the US, Asia, Australia and Canada. Positive news in light of the imminent triggering of Article 50 and the start of the UK negotiating its departure from the European Union.
However, mainland Europe is still an important geography for many exporting manufacturers, something borne out by not only this and previous PMI announcements, but multiple economic and industry reports.
Manufacturers are indicating a positive outlook for the future, with close to half expecting output to be higher in 12 months-time, compared to just 6% anticipating a decline. Markit/CIPS attributed the optimism to forecasts of improved demand, increased capital investment, company expansion plans and new product development.
Senior economist at PMI compiler, Markit, Rob Dobson commented: “The survey is signalling quarterly UK manufacturing growth close to the 1.5% mark so far in the opening quarter which, if achieved, would be one of the best performances over the past seven years.
“The big question remains as to whether robust growth can be sustained or whether it will continue to wane in the coming months.”
Head of Manufacturing at Barclays, Mike Rigby noted: “Two months into 2017 and despite a slowing in the rate of growth in February, manufacturers continue to register strong levels of output, healthy order books and growing trade courtesy of a weak sterling.
“However, despite the recent surge in exports, the sector continues to rely mostly on domestic demand and with price rises feeding through on the back of growing input costs, even with their recent easing, inflationary pressure continues to hover with intent. It’s how manufacturers now respond, particularly in their investment intentions, that will help determine how long the raised level of optimism in the sector continues.”
Head of UK manufacturing at Lloyds Bank Commercial Banking, Dave Atkinson said: “There will be fears that the latest PMI data suggests the manufacturing sector is showing the first signs of slowdown since last summer as the UK prepares to begin in earnest the process of leaving the European Union.
“Yet despite persistent headwinds, principally the uncertainty around future trade terms and pricier imports as a result of the weaker pound, some exporting manufacturers are taking the opportunity to review their international trade strategies and look beyond the EU, especially taking advantage in the short term of the devaluation of sterling making our exports more competitive.”