UK manufacturing orders slide but stockpiling boosts output
UK manufacturers benefitted from further stockpiling last month, as companies looked to prepare for potential Brexit-related disruptions, with new orders almost stagnant.
The UK purchasing managers' index from IHS Markit fell to 52.0 for February from the previous month's figure that was revised down to 52.6 from 52.8. A PMI reading above 50 indicates growth.
February's reading was in line with forecasts but the second-slowest rate in over two-years.
New order growth slipped steeply to minimal levels as domestic and export orders declined, with a rise in the output balance from 51.5 to 52.9 almost entirely reflecting companies' efforts to reduce backlogs and build stocks of finished products in advance of the default 29 March Brexit date.
Manufacturers' optimism regarding future output fell to its lowest level in the series history.
"February PMI offers little evidence that any short-lived boost to output from stock-building is sufficient to claw the sector back into growth territory," said Rob Dobson, director at IHS Markit.
Duncan Johnston, UK manufacturing industry leader at Deloitte, said the data shows that Brexit uncertainty is providing a short-term boost to the sector but the survey "highlights concerns about the global economic outlook and in particular slower growth in Europe which are continuing to cloud the horizon".
He noted that the uncertain economic outlook was leading to job losses in large business and small and medium-sized manufacturers. "This is concerning as smaller businesses are less able to absorb the impact of changes in their workforce.”
Economist Thomas Pugh at Capital Economics said a stagnant manufacturing sector would still be an improvement on the 0.7% month-on-month contraction recorded in December, the latest hard data.
"Overall, it is clear that the manufacturing sector is being hit hard by the combination of Brexit and the global slowdown. As such, the survey suggests that the manufacturing sector will provide little support to the economy in Q1, even though there are some signs of activity being bolstered by Brexit preparations."