Investing.com - Manufacturing activity in the UK unexpectedly slowed at the start of 2018, dampening optimism over the British economy, industry data showed on Thursday.
In a report, market research group IHS Markit said that its UK manufacturing PMI dropped to a seasonally adjusted 55.3 last month.
Analysts had expected the PMI to inch up to 56.5.
That compared to December’s reading of 56.2 which was revised down from the preliminary 56.3
On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.
IHS Markit highlighted that the growth of output and new orders slowed further, while input cost and selling price inflation accelerated.
“The UK manufacturing sector reported an unwelcome combination of slower growth and rising prices at the start of 2018.,” Rob Dobson, senior economist at survey compiler IHS Markit, said.
“Encouragingly, despite the slowdown, the latest survey is consistent with production rising at a solid quarterly rate of around 0.6% in January, with jobs also being added at a faster pace,” he added.
Regardless, Dobson warned that the output growth had undergone a sharp slowdown since last November’s high and while the more forward-looking new orders had hit a seven-month low.
“The trend in demand will need to strengthen in the near-term to prevent further growth momentum being lost in the coming months,” he explained.
With regard to prices, Dobson noted that recent easing in inflationary pressure saw a sharp reversal, as cost inflation hit an 11-month high at one of the highest levels in the series history.
He attributed the surge to the jump in oil prices and the fact that demand for many inputs surpassed supply, all of which pushed selling price inflation to its highest level in nine months.
“These price trends will be watched closely to see if the upsurge is simply a one-off spike or something more embedded,” Dobson concluded.