Growth in the UK's manufacturing sector fell to a three-month low in February

Emma Haslett
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UK manufacturing growth has been steady in recent months (Source: Getty)

Growth in the UK's manufacturing sector fell to a three-month low in February, new figures have shown.

Markit's manufacturing PMI fell to 54.6 in February, down from 55.9 in January.

Growth was still solid – any number above 50 on the index indicates growth – but the figure nevertheless missed analysts' expectations of 55.6.

Markit put the growth down to "solid growth of production and new orders during February", pointing out that the growth was well above the sector's long-term average of 51.6.

Read more: UK car firms are still eyeing global growth though Brexit jitters remain

"The UK manufacturing sector continued its solid start to the year," said Rob Dobson, senior economist at IHS Markit.

"Although rates of expansion in output and new business lost impetus in February, growth remained comfortably above the long-run averages. The survey is signalling quarterly manufacturing output growth close to the 1.5 per cent mark so far in the opening quarter which, if achieved, would be one of the best performances over the past seven years.

Analysts suggested the weak pound had helped, driving up sales for some manufacturers (although others are struggling with higher input costs) – although they struck a note of caution.

"While the more competitive exchange rate can boost demand for UK products it is a double-edge sword for some manufacturers," pointed out Kallum Pickering, senior UK economist at Berenberg.

"On a trade-weighted basis, sterling has depreciated by 12 per cent since the Brexit vote. While a weaker exchange rate is a positive for export demand, it raises input costs.

"This rise in input costs will squeeze margins and could limit the extent to which some exporters can pass the gains from a more competitively priced sterling onto foreign consumers. This problem is likely to be especially prevalent for producers who buy inputs in dollars – cable is down 17 per cent since the Brexit vote.

"But net-net, the weak sterling should have positive impact on UK exports over time. In particular, the depreciation of sterling against the euro plus the continued stable recovery in the Eurozone should support a recovery in industrial production. Demand from the Eurozone already started to improve during the middle of 2016 following a five-year period of declining exports to the Eurozone that began during the euro crisis."

Read more: Economists: Indicators to show further expansion for UK economy

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