UK manufacturing PMI rose above forecasts in February

According to the report from IHS Markit/CIPS, the upturn of the UK manufacturing sector was constrained by supply-chain disruption and rising cost pressure in February, keeping output growth only marginal despite a modest improvement in new order intakes.

The seasonally adjusted manufacturing PMI rose to 55.1 in February, up from 54.1 in January and above the flash estimate of 54.9. The PMI has signalled growth for nine months in a row.

Output rose at the weakest pace during the current nine month sequence of increase. New orders expanded following a slight decrease in January, as domestic demand improved and new export business inched higher. Companies reported improved demand from several markets – including the US, Asia, Scandinavia and (in a few cases) mainland Europe - but noted that the ongoing impact of COVID-19, Brexit complications and shipping difficulties also constrained export order growth.

Investment goods was the best performing sector during February, registering the fastest growth of output, new orders, new export business and employment of the three industries covered by the survey. Intermediate goods also saw production and new business increase, in contrast to the continued downturn at consumer goods producers.

Business optimism rose to a 77-month high in February, with over 63% of companies reporting that they expect output to be higher in one year's time. Positive sentiment was linked to continued recovery from the pandemic, reopening of the global economy (including less transport restrictions) and reduced Brexit uncertainties.