The UK manufacturing sector continued to implement plans to reduce possible Brexit-related disruptions throughout February.
Purchasing activity was increased to stockpile raw materials, leading to a survey-record expansion in input inventories.
The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to a four-month low of 52.0, down from the revised reading of 52.6 in January (originally stated as 52.8).
This reading is at its second-lowest level since July 2016, the month following the EU referendum.
While the trend in manufacturing output improved marginally in February, it mainly reflected the efforts to reduce backlogs of work and build stocks of finished products in advance to Brexit.
Growth of new order inflows eased to near inactivity, following signs of a slow domestic market and drop in new export orders. Firms linked lower overseas demand to weaker global economic growth, especially in Europe.
Preparations to ease Brexit uncertainty were most noticeable in the trend of stocks of purchases. Pre-production inventories rose to the biggest extent in the series history, after also hitting a record high in January. Almost 70% of the firms offering a reason behind the build-up of stocks, linked it to Brexit.
Efforts to stockpile inputs were assisted by a solid expansion of purchasing activity for UK manufacturing. This was also felt by suppliers, where the increased demand for raw materials led to a further marked lengthening in average lead times.
A combination of the recent dull performance of the industry, paired with the uncertain outlook, filtered through to the labour market this month.
Manufacturers’ optimism regarding future output fell to its lowest level in the series history throughout February, as positive sentiment was either at, or near to, record lows across the consumer, intermediate and investment goods industry.
Some firms forecasted that expected gains in the market share, and reduced levels of uncertainty may lead to higher output one year from now, although many remained concerned about the impact of Brexit, exchange rates and slow global economic growth.
Input cost inflationary pressures continued to ease in February, with the rate of improvements at its lowest level since April 2016.
Manufacturers were still able to pass on part of the rise to clients, leading to an increase in selling prices.
Operating conditions signalled a softer, but solid improvement across the U.S manufacturing industry.
The PMI posted at 53.0, a fall from 54.9 last month, and the lowest since August 2017.
Reasons behind this include slower expansions in output and new orders, with increases slower than their respective long-run trends, and growth rates decreasing to 17- and 20-month lows, respectively.
Production increased in February, but at a slower pace. Panellists reported that the upturn came from a sustained expansion in new business and efforts to clear backlogs.
However, the rise in output was modest overall, with growth the softest since September 2017, and below the long-run trend.
New business received by manufacturers also expanded at a slower rate.
The upturn was the weakest since June 2017, although panellists said that firmer client demand drove the latest increase, some businesses stated that longer lead times were pushing clients to find alternatives.
Foreign client demand increased, and although marginal, the rise in new export orders quickened.
Input cost inflation eased to an 18-month low in February, with the increase in purchasing prices sharp, reflecting higher raw material costs and tariffs.
Factory gate prices rose, but at the second slowest rate since December 2017.
A slower rise in new business led to softer growth in buying activity.
Growth in pre-production inventories also eased in February as stocks of inputs were used in production.
Expectations towards the one-year outlook for output remained positive, and panellists were buoyed by predications of further upturns in new business.
The degree of confidence, however, fell to the second-lowest since November 2016.
There was a decline for Eurozone manufacturing operating conditions throughout February.
The PMI declined below 50.0 for the first time since June 2013. After accounting for seasonality, the PMI recorded 49.3, down from 50.5 in January.
While it’s a minor fall, it ended a run of growth in the manufacturing economy that had stretched to over five-and-a-half years.
Weakness was most apparent in the intermediate and investment goods industries, with both recording decreases in operating conditions compared to the previous month.
In contract, consumer goods continued to expand, but at a modest pace and weakest since July 2016.
Countries that saw major decreases include Germany, which fell to a record 74-month low of 47.9, down from 49.7 in January, and Italy, which recorded its lowest level in nearly six years (47.7).
Spain also fell in operating conditions for the first time since November 2013 (49.9).
Growth improved a little in France, but remained weak (51.5).
The Netherlands fell from 55.1 in January to 52.7.
Greece and Ireland recorded stronger PMI readings (54.2) and (54.0), respectively.
Manufacturing output fell into negative territory for the first time in over five-and-a-half years, and output was undermined by the sharpest fall in new work since April 2013.
A difficult international climate, categorised by political and trade uncertainties, meant that export orders fell for a fifth successive month, and to the greatest degree for over six years.
Despite the small fall in output, evidence of spare capacity in the manufacturing economy continued to build. Backlogs of work declined for a sixth successive month.
Inventories of finished goods were higher for a fifth successive month, but only a little, and to a lesser degree than the survey record seen at the start of the year.
Input price pressures continued to weaken throughout February.
Led by lower prices paid for oil-based products and reducing supply-side constraints, input costs rose to the slowest degree since October 2016.
Output charges increased at its weakest rate since the end of 2016.
Doubts over domestic, political and international trade developments continued to weigh on expectations during the latest survey period. Overall, business confidence was the weakest in the past six years.
China’s PMI fell from 49.5 to 49.2 in February.
The main raw materials inventory index was 46.3, a decline of 1.8 from last month (48.1), and lower than the threshold, signalling that the decline of the manufacturing industry’s main raw material has expanded.