February data from the Chartered Institute of Purchasing & Supply/Royal Bank of Scotland survey of United Kingdom manufacturers confirmed that the sector started 2007 on a progressively positive note. At 55.4 in February, the seasonally adjusted CIPS/RBS Purchasing Managers' Index posted its highest reading in more than 2.5 years.
“February PMI data confirm that U.K. manufacturing has thrown off the sluggishness of the end of last year to start 2007 on a sound footing,” said RBS Group chief economist Andrew McLaughlin. “The improvement in demand was especially positive, as new orders rose at the fastest pace since July 2004. Market conditions remain conducive to further growth. Prices charged inflation hit a series high while cost inflation remains elevated. Such signs that inflationary pressure is still building in the manufacturing sector, coupled with strong manufacturing growth, should provide additional ammunition for the more hawkish members of the MPC.”
The rate of expansion in new work received accelerated sharply in February, to reach its highest level since July 2004. Companies reported strong demand from both domestic and foreign clients.
U.K. manufacturers’ export performance was highly positive in February, as new export orders rose at the most robust rate since January 2004. Panelists reported improved demand from clients operating in the U.S., Japan, China, Germany, Russia, the Middle East and Australia.
Robust growth of new orders, alongside increases in worker productivity and plant efficiency, led to a further marked expansion in output.
There were also signs that robust operating conditions were driving a recovery in firms’ pricing power, as average factory gate prices rose at the fastest rate since charges data were first collected in November 1999.
Input cost inflation remained marked in February, as companies reported higher prices for certain raw materials (including chemicals, metals and timber).
Manufacturing employment increased for the second month running in February, with the rate of job creation the fastest since March 2005.