UK manufacturing slows as costs jump

Britain's manufacturing sector expanded more weakly than expected last month as growth in domestic orders slowed and demand from…

Britain's manufacturing sector expanded more weakly than expected last month as growth in domestic orders slowed and demand from abroad failed to pick up.

The Chartered Institute of Purchasing and Supply/RBS purchasing managers' index (PMI) also showed a sharp acceleration in manufacturers' costs to a 13-month high, while factory gate prices grew at their fastest rate in a year.

The headline PMI index eased to 51.7 in February from an upwardly revised 51.8 in January. That was below analysts' forecasts for a reading of 52.0, but was still above the 50.0 level that separates growth from contraction.

It was the seventh straight month of growth and was driven largely by an improvement in output, which grew at its fastest rate in 15 months, while total orders growth eased and export orders remained unchanged.

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The output index picked up to 54.4 in February from an upwardly revised 53.9 in January, while the new orders index eased to 52.6 from 53.1.

The export orders index showed a reading of 50.0 - indicating no growth - from 48.5 in January. The report said that surging energy and raw materials prices bumped up manufacturers' costs in February, but firms also raised their prices.

That may cause concern among Bank of England policymakers who are worried that rising fuel prices will push up inflation and feed through into workers' wage demands.

The input prices index rose to 65.7 in February from an upwardly revised 61.6 in January, the fastest growth in 13 months, while the output prices index rose to a 12-month high of 54.1 from 53.6.

The sector continued to shed jobs in February, but at its slowest rate since last October, with an employment index reading of 47.6, up from 46.5 in January.