LONDON (Reuters) - Manufacturing growth held at a record level in February and factory costs stayed near January’s survey high, suggesting price pressures are continuing to build, a survey showed.
The Markit/CIPS headline manufacturing Purchasing Managers’ Index (PMI) stood at 61.5 in February, unchanged from a downwardly revised 61.5 in January. That was the highest since the survey began in January 1992 and above the consensus forecast of 61.
Signs of robust manufacturing growth and surging manufacturing costs could add to calls for the Bank of England to raise interest rates sooner rather than later to curb inflationary pressures.
Consumer price inflation is running at double the central bank’s 2 percent target and is set to rise further, while interest rates have been at a record low of 0.5 percent since March 2009.
“Input cost and output price inflationary pressures remain elevated, which may raise a further eyebrow amongst the members of the Bank of England’s Monetary Policy Committee,” said Rob Dobson, senior economist at Markit.
The PMI’s input price sub-index’s reading of 83.7 was close to January’s revised survey high of 84.1 and was led by rising prices for raw materials such as cotton, energy and metals.
Output prices rose for the 16th consecutive month in February to reach their highest rate since August 2008, with the steepest increases in chemicals, food and drink and timber.
Tuesday’s PMI survey showed that employment in the manufacturing sector grew at a record pace in February.
New orders in February eased slightly from a 16-year high in the previous month, although the reading was still among the highest in the survey’s history.
The upbeat survey may provide some cheer for the coalition government, which is counting on manufacturing to create employment and help offset job losses in the public sector as the government slashes costs in the next few years to reduce its high debt.
However, while the manufacturing sector has maintained its strong start to the year, Markit’s Dobson cautioned that it accounts for only 13 percent of Britain’s GDP, compared to 52 percent for non-government services.
“(It) can only partly offset the weaker parts of the economy such as services and construction,” he said.
Editing by Susan Fenton