Manufacturing activity expanding despite high costs

1 March 2011

1 March 2011 | Lindsay Clark

Growth in UK manufacturing remained at a record level in February, a survey of buyers found.

The seasonally adjusted Markit/CIPS UK Manufacturing PMI posted 61.5 last month, unchanged from January’s record high. The PMI has been above the 50 mark, which indicates no change, for 19 successive months.

However, purchasing managers were struggling with escalating prices in the manufacturing sector. The seasonally adjusted input prices index stood at 83.7 in February, down only slightly compared to the previous month and remaining close to a 10-year peak.

Manufacturers also linked input cost rises to increased global demand for a number of items and to ongoing supply chain shortages. Purchasing activity rose markedly in February, with the extent of the increase only slightly less marked than January’s high for more than 16 years.

CIPS CEO David Noble, said: “Strong growth in demand across the manufacturing sector continued to put breath in the sails of the UK economy in February. This was the case at home as well as overseas leading to record increases in output and in turn to more jobs being created.

“The fly in the ointment remains macro-level inflation which is likely to go from bad to worse due to the unrest in Libya and escalating oil prices. Purchasing managers reported raw materials costs were continuing to rise at historically high levels during February, leading many to pass on higher purchasing costs to their clients.”

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