The latest CIPS UK Manufacturing Purchasing Managers’ Index has decreased to 46.9 points from 48.3 points, remaining below 50 for the fifth consecutive month and the lowest level since December 2023.
“This demonstrates the ongoing challenges for manufacturers and potentially the impact of the Autumn Budget on business confidence and activity,” said RSM UK national head of manufacturing.
“The index also revealed a spike in input prices to 60 which is reflective of broader supply chain issues and cost pressures, in part following UK inflation rising more than expected to a 10-month high of 3% in January. Higher production costs will squeeze profit margins and make price rises inevitable and drive higher prices for consumers.”
Price pressures
Underlying price pressures continued to climb in February, with rates of inflation in input costs and output charges both accelerating. Higher purchase prices were linked to suppliers front loading expected increases in their own costs (such as higher minimum wages and employer NICs), material shortages and general price inflationary pressures.
In turn, selling prices rose to the greatest extent since April 2023, reflecting the pass through of current and expected cost increases to clients, higher staff costs and increased tax burdens.
Despite the negatives, business optimism rose to a six-month high in February, attributed to investment spending, marketing initiatives, new products and projects, planned diversifications and hopes economic conditions would strengthen.
Tom Pugh, economist at RSM UK, added: “Another reading below 50 in February, suggests that manufacturing firms continue to struggle as economic stagnation persists into 2025.
Trade partners
“A combination of weak growth in our major trading partners such as France and Germany, combined with uncertainty around US tariffs, and therefore a potential global trade war, continues to weigh heavily on manufacturing firms.”
Even if the UK were to avoid direct tariffs, an increase in global trade barriers would have a ‘stagflationary’ impact on the broader economy, Pugh warned, especially on the manufacturing sector.
“What’s more, if the US imposes large tariffs on its other trading partners, goods that would have gone to the US will be diverted elsewhere, potentially increasing international competition for UK manufactured goods,” he concluded.
Meanwhile, global poultry trade growth has slowed significantly, with geopolitical tensions creating a volatile environment that has driven up prices and limited export opportunities, according to Rabobank.
