UK manufacturing growth slows in February

Growth in the UK manufacturing sector slowed more than expected in February, according to data released on Wednesday.

The Markit/CIPS manufacturing purchasing managers' index fell to 54.6 from 55.7 in January. The reading marked a three-month low and missed expectations for a more modest drop to 55.6, but it was still firmly above its long-run average of 51.6.

A reading below 50 signals contraction, while a reading above signals expansion.

The decline in the index came as growth in new orders slowed and backlogs of work fell back, suggesting output growth may slow further. However, elevated business optimism, continued job creation, a recovery in export orders and rising levels of purchasing indicated that any easing will be mild.

The survey found that almost 50% of manufacturers expect output to be higher in a year's time, compared to only 6% anticipating a decline.

Rob Dobson, senior economist at IHS Market, said: "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."

Dobson added that the survey is signalling quarterly manufacturing output 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.

Howard Archer, chief UK and European economist at IHS Markit, said: "While weaker than January and December, this is still a decent survey that points to decent manufacturing expansion in the first quarter. This would follow manufacturing output rebounding a pleasing 1.2% quarter-on-quarter in the fourth quarter of 2016 after declining 0.8% quarter-on-quarter in the third quarter."