Manufacturing employment rises at fastest pace for three years

At 56.9 in February, from a revised reading of 56.6 in January, the seasonally adjusted Markit/CIPS Purchasing Manager's Index (PMI) ticked higher and signalled improved operating conditions for the 11th successive month. The strengthening domestic market remained the primary driver of the manufacturing recovery. Companies also linked higher output to promotional activity, new product launches and investment in new machinery. Consumer, intermediate and investment goods producers all reported robust increases in output, new orders and employment during February, suggesting that the upturn remained broad-based by sector. New export business also posted a solid gain in February. However, the rate of increase eased from January's near three-year record. Manufacturers reported improved inflows of new work from clients in Europe, the US, China, the Middle East and Africa. The pace of jobs growth reached a 33-month high in February, as the improved performance of the sector encouraged companies to take on more staff. Also underpinning the rise in employment were signs of strain on the capacity of some firms, as highlighted by a slight gain in backlogs of work during the month. Strong demand also aided the pricing power of UK manufacturers, as average selling prices rose for the eighth month running and to a greater extent than in January. This mainly reflected efforts to improve profitability and recover prior cost increases, as the latest data showed that input prices were unchanged during February. Holdings of finished goods were depleted for the fourth month running in February, with the rate of reduction being both marked and faster than in the previous survey period. Stocks of purchases also dipped lower, but fell at only a moderate pace that was much slower than that signalled in January. The weaker pace of depletion mainly reflected a marked increase in purchasing activity at UK manufacturers. Lee Hopley, chief economist at EEF, said: "Manufacturing continues to expand at a robust pace with today's data indicating above-trend growth in production and new orders. A strong pick-up in job creation also highlights the current strength of demand in the domestic market, while solid gains in export business offers encouragement that production will continue to rise at a healthy clip over the coming months. "The sector remains on track to provide another solid positive contribution to UK GDP growth in the first quarter and we forecast UK manufacturing output to increase by 2.7% over 2014 as a whole, the fastest rate of expansion in four years. To keep this momentum going it is essential that the Budget builds on improving sentiment across the sector to support companies' investment decisions in the year ahead." Rob Dobson, senior economist at Markit, said: "The survey suggests we should expect another quarter of robust economic growth in the opening quarter of the year. The Manufacturing PMI ticked higher in February to provide welcome reassurance that the sector has weathered the storms and flooding in parts of the country during the month. Growth of production and new orders lost only a little momentum and are still rising at above trend rates."