Manufacturing production has picked up in each month since June 2016, and the latest rise was one of the fastest recorded over the past two years. A robust pace of output growth was attributed to a combination of increased client spending and efforts to rebuild finished goods inventories in February. Post-production stocks have now risen for five months in a row, which represents the longest period of inventory building since mid-2015.
Mirroring the trend for production volumes, the rate of new business growth moderated only slightly from the peak seen at the start of 2017. Survey respondents commented on improving domestic economic conditions and a boost from greater investment spending among energy sector clients. This helped to offset a near-stagnation in export orders in February. The latest rise in new work from abroad was the weakest since September 2016, reflecting a continued drag on demand from the strong dollar.
Manufacturers responded to greater new business levels by hiring additional staff and increasing their purchasing activity during the latest survey period. The rate of job creation was nonetheless softer than the 18-month peak recorded at the end of 2016. Rising payroll numbers helped to boost operating capacity and contributed to a slower pace of backlog accumulation in February. Meanwhile, strong demand for inputs and efforts to boost preproduction inventories placed pressure on suppliers’ stocks and contributed to longer delivery times for raw materials.
February data pointed to a robust rate of input price inflation across the manufacturing sector. Although slightly slower than in January, the latest rise in average cost burdens was still one of the fastest recorded over the past two-and-a-half years. Rising prices for raw materials in turn led to another moderate increase in average prices charged by manufacturing companies.