Belfast Telegraph

Friday 22 August 2014

Soaring price of oil blamed as manufacturing growth falters

Growth in the UK manufacturing sector was weaker than expected in February as rising oil costs drove up prices at their fastest rate in more than 19 years.

The Markit/CIPS survey, where a reading above 50 represents growth, showed the sector grew at 51.2, down from 52 the previous month and weaker than City expectations of 52.1.

Manufacturers battled the sharpest monthly rise in input prices for more than 19 years and the second sharpest in the survey's history after three months of decline.

Rising oil prices, which have been as high as $109 a barrel in recent weeks amid the tensions over Iran's nuclear programme, pushed up the cost of chemicals, metals, plastic and transport for businesses.

The rising prices threaten to derail the sector's recent rebound amid signs that new work from domestic and overseas clients stagnated.

Rob Dobson, senior economist at Markit, warned: "If this combination of rising costs and weak demand persists, sustaining output growth and job creation will become increasingly difficult."

The prices manufacturers charge for their goods rose at the quickest pace for five months.

But this was not as fast as the rise in input costs, suggesting that their profit margins are in danger of being squeezed as they struggle to hike prices amid weak demand.

The manufacturing sector declined in the final quarter of 2011, dealing a blow to Chancellor George Osborne's plans to rebalance the economy through increasing exports.

However, it returned to growth in January amid rising orders from emerging markets and falling costs.

$109

The recent high for a barrel of oil which is hitting profit margins

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