Rising input costs stem the flow of manufacturing growth

1 March 2012

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1 March 2012 | Adam Leach

Cost pressure has increased in the manufacturing sector for the first time in four months, resulting in a slowdown in the rate of growth, according to a report.

The Markit/CIPS Manufacturing PMI, published today, reported a growth figure for February of 51.2, indicating growth but at a slower rate than January’s eight-month high of 52.0.

Production and employment continued to increase, however, the impact was tempered by the first rise in input costs for four months, which hit new orders.

The measurement in the survey tracking input prices posted the highest monthly increase for more than 19 years, the second biggest ever, as companies reported high prices for chemicals, feedstocks, metals, oil and other commodities. In addition, a drop in demand from Europe cancelled out the benefits of increased export orders from Asia and the US.

CIPS CEO David Noble, said: “The manufacturing sector consolidated on January’s sharp increase in growth, but the return of rising oil prices and lacklustre demand is a cause of some trepidation. While the tentative boost in employment is a sign of increased confidence in the sector, this can be attributed to efforts to fulfill the growth in new orders seen at the beginning of the year.”

Rob Dobson, senior economist at Markit, said: “If this combination of rising costs and weak demand persists, sustaining output growth and job creation will become increasingly difficult.”

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