February data indicated that manufacturing output growth slowed for the third time in the past four months. The latest increase in production was only modest and the weakest recorded since October 2013. Reports from survey respondents suggested that softer new business growth and uncertainty about the economic outlook had acted as a brake on production at their plants.
Volumes of new work increased moderately in February, with the pace of expansion easing to one of the slowest recorded over the past three-and-ahalf years. Anecdotal evidence suggested that clients had delayed spending decisions in February amid caution about the business outlook. Additionally, there were further reports citing weak demand from energy sector clients. Subdued export demand also weighed on new business levels in February. The latest survey pointed to the most marked decline in new orders from abroad since April 2015, which manufacturers partly linked to competitive pressures from the strong dollar.
Softer overall new business growth contributed to a renewed drop in backlogs of work across the manufacturing sector in February. At the same time, employment growth moderated for the second successive month. The latest increase in payroll numbers was only modest, and the weakest recorded since September 2015. A number of firms suggested that the uncertain business outlook had led to more cautious staff hiring patterns at their plants.
Meanwhile, manufacturers indicated a decline in their input buying for the first time since October 2013. This was linked to slower output growth and corresponding efforts to tighten inventories in February. Weaker demand for inputs contributed to a slight improvement in supplier performance.
February data highlighted a reduction in input prices for the sixth consecutive month. Manufacturers mainly commented on lower steel prices and energy costs. Reduced cost burdens and strong competition for new work in turn resulted in the fastest drop in output charges for over three-and-a-half years.