Oil costs prove headache for sector

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Growth in the UK’s 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 declines.

Rising oil prices, which have been driven as high as 109 US dollars a barrel in recent weeks amid 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 new work from domestic and overseas clients stagnated. Rob Dobson, senior economist at Markit, said: “The latest PMI survey brought the headwinds faced by manufacturers into sharper focus.

“Cost inflation also resurfaced, picking up sharply on the back of high oil prices and associated increases in the costs of chemicals, energy and transportation.”