10 out of 14 UK sectors reported output growth in February - up from eight in January and the most since
Software providers and financial services firms recorded the strongest rates of output growth
The service sector benefited from resilient demand, while manufacturing output growth was driven by optimism around future demand and backlogs of work
Global supply chain disruption and wage pressures pushed input costs up at the fastest pace in six months
The number of
In February, 10 of the 14 UK sectors monitored by the Tracker reported output growth. This was two more than in January (eight), the most since
Software services - which includes software consulting and data processing firms - saw output grow at the sharpest rate of any sector monitored in February (57.5), closely followed by financial services (57.4), which includes banks, insurers and investment services firms. A reading on the Tracker above 50.0 indicates expansion, while a reading below 50.0 indicates contraction.
Meanwhile, technology equipment (43.2) and tourism and recreation (45.7) saw output contract at the fastest rates.
Drivers of growth
Output growth in the service sectors monitored by the Tracker was driven by growing demand. In February, the Tracker's index for service sector demand, measured by volumes of new business, climbed to 53.5 - its highest level since
However, in manufacturing, new orders fell for an 11th month in a row (45.4). Tracker data suggests that manufacturing output growth was instead driven by firms running down backlogs of unfinished work, while businesses also indicated they were proactively increasing production in response to an improvement in underlying demand conditions.
In February, the net balance of manufacturers that expect their output to be higher in 12 months' time rose to the highest level since
Supply chain disruption feeds through to
Alongside broadening output growth, February data provided further indications that global supply chain disruption, along with wage pressures, were potentially starting to increase costs for
In February, the Tracker's composite index of input price inflation rose to its highest level in six months. This came as more manufacturers reported shipping delays than at any time since
As a result, the rate at which prices charged to customers rose also accelerated marginally in February, albeit less sharply than input costs, suggesting that businesses were not passing the full extent of cost increases onto their clients.
Although the Tracker's measure of wage cost pressures dropped to a four-month low in February (1.47 times the long run average), wages continued to be a cited as a key cost driver.
Nikesh Sawjani, Senior
'This positive momentum, alongside last week's GDP data showing the
'Similarly, if firms are ramping-up production in anticipation of future demand, it's critical that they consider how they can build the inventory they need and where to invest in their businesses while still protecting their working capital.
'Getting this balance right will mean they can continue to be financially agile and able to mitigate against any sudden movements in the economy or external environment.'
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