UK manufacturing PMI declined moderately in February, confirming forecasts

According to the report from IHS Markit/CIPS, the headline seasonally adjusted manufacturing PMI fell to a four-month low of 52.0 in February, down from a revised reading of 52.6 in January (originally reported as 52.8). The PMI is currently at its second-lowest level since July 2016 – the month following the EU referendum.

Although the trend in manufacturing output improved slightly in February, this mainly reflected efforts to reduce backlogs of work and build stocks of finished products in advance of Brexit. Growth of new order inflows eased to near-stagnation, amid signs of a slowing domestic market and a further drop in new export orders. Companies linked lower overseas demand to weaker global economic growth, especially in Europe. Manufacturers' optimism regarding future output fell to its lowest level in the series history in February. Manufacturers cut back on employment for the second consecutive month, with the rate of job losses the steepest since February 2013.

Input cost inflationary pressures continued to ease in February, with the rate of increase the lowest since April 2016. Manufacturers were still able to pass on part of the rise to clients, leading to a further increase in selling prices.