British factory output grew last month at the fastest rate since July while cost pressures increased at the slowest pace in almost a year, a closely watched survey showed on Tuesday.
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The IHS Markit/CIPS manufacturing Purchasing Managers' Index (PMI) recorded an output reading of 56.9 in February, up from 54.5 in January and just above an initial 'flash' estimate.
The broader headline manufacturing PMI rose to a three-month high of 58.0, also above the flash estimate for it to remain at January's reading of 57.3.
"Higher new work intakes reflected stronger domestic demand, new customer wins, looser COVID restrictions and improved market conditions," IHS Markit said.
However, export orders fell slightly - something which British manufacturers blamed on Brexit-related issues, ongoing COVID restrictions abroad and customers' unwillingness to wait a long time for deliveries.
The last official data, for December, showed annual manufacturing output growth of 1.3%.
Britain's economy largely recovered from its COVID-19 slump last year, but the Bank of England expects growth to slow in 2022 as consumer demand is squeezed by a surge in energy prices, which has sharpened since Russia's invasion of Ukraine.
Tuesday's data did show some signs of supply-chain difficulties easing last month, with factories' input costs growing at the slowest pace since April 2021 and their prices rising by the least since May.
The BoE last month forecast consumer price inflation would peak above 7% in April when a 50% rise in household energy tariffs takes effect, and financial markets expect the bank to raise interest rates from 0.5% to close to 2% by the end of 2022.
Manufacturers were fairly upbeat about the year ahead, however, with 64% predicting a rise in output over the next 12 months. Hiring rose too, though at a slightly slower pace than in January amid widespread labour shortages.
(Reporting by David Milliken; Editing by Susan Fenton)