Press release

1 Mar 2023 London, GB

Healthy improvement in February's manufacturing PMI – EY ITEM Club comments

Martin Beck, Chief Economic Advisor to the EY ITEM Club, provides analysis on the latest Manufacturing PMI.

Related topics Growth
  • February's UK manufacturing Purchasing Managers’ Index (PMI) rose to 49.3, driven by stronger demand and reduced supply chain disruptions. February's increase was from a low base, but it adds to evidence that the economic outlook is brightening.
  • The S&P Global/CIPS survey also pointed to a further cooling in input and prices-charged inflation. These developments are consistent with other evidence that inflationary pressures are receding, and reinforce the EY ITEM Club’s expectation that the CPI measure will quickly fall this year.

Martin Beck, chief economic advisor to the EY ITEM Club, says: “The manufacturing PMI rose to 49.3 in February from 47.0 in January, the highest since July 2022. Furthermore, the S&P Global/CIPS survey signalled a rise in manufacturing output, albeit modest, for the first time in nine months, driven by stronger demand and an improvement in supply conditions. Admittedly, the headline PMI was still in contractionary, sub-50 territory, but the downturn in the sector looks to have eased significantly over the last few months.

“February's survey also showed a substantial rise in business optimism, reflecting receding concerns about recession and signs that inflation has peaked. The near-term outlook for manufacturers still looks weak, however, given the headwinds from financially squeezed consumers and still-high energy costs. But, these headwinds are easing, and the risk of a recession this year is looking less certain.

“Meanwhile, February's survey pointed to an easing in inflationary pressures. Input costs rose at the slowest pace since July 2020 as supply-chain disruptions softened, while output prices rose at their slowest pace in over two years. These developments are consistent with other signs that inflationary pressures are receding, including lower energy and other commodity prices. They also reinforce the EY ITEM Club’s expectation that inflation will quickly fall this year.”