The performance of the UK manufacturing sector remained very weak in February. The seasonally adjusted CIPS/Markit Purchasing Managers’ Index (PMI) – a headline index designed to provide an accurate snapshot of manufacturing sector conditions – posted 34.7, falling back towards the record low posted in November 2008.

The PMI has remained below the critical no-change mark of 50.0 for ten successive months, equalling the sustained period of contraction recorded during late 2002 and the first half of 2003. However, the current index value is around fifteen points below those posted at the end of that downturn.

February data pointed to survey record contractions in both output and employment. Companies reported that the ongoing retrenchment in incoming new orders was the principal factor underlying the weaker trends in production and staffing levels. The domestic market remained the centre of the downshift in demand.

The rate of decline in new export orders accelerated sharply in February, moving back towards December’s series record. This was despite the mitigating influence of the sterling exchange rate. Firms reported reduced demand from East Asia, the Eurozone, the Middle East and the US.

There was a noticeable shift in the focus of the  manufacturing recession towards large sized companies in February. Rates of decline in output, new orders, new export orders and employment were all substantially more severe than at SMEs.

Latest data indicated that intermediate goods producers fared worst during February, reflecting their greater exposure to the wider economic downturn and sectors such as autos and construction. Conditions were also weak in the capital and consumer sectors, as both saw deeper falls in output than one month ago.

On the prices front, February data pointed to reductions in both input and output prices. Factory gate price deflation was the fastest for almost seven years, reflecting a combination of strong competition, weakening demand and lower costs. Meanwhile, lower commodity prices drove down average purchasing costs, despite widespread reports that the weak sterling exchange rate was raising the price of imported raw materials.

Pre-and post-production stocks both fell in February as companies ran-down inventories, and reduced purchasing activity. This was in line with lower output requirements and firms’ bids to improve their cash flow positions.

Roy Ayliffe, Director of Professional Practice at the Chartered Institute of Purchasing & Supply, said:“Latest PMI data confirms the degeneration of the UK manufacturing sector as it contracted at a rate evocative of the dire conditions seen in the early 80s.

“While the recession initially hit SMEs the worst, larger manufacturers – especially those dependent on the automotive and construction sectors – are increasingly struggling. And with bigger firms now in the equation, we are seeing jobs slashed at a record rate as firms try to survive the unrelenting market conditions.”

Rob Dobson, Senior Economist at Markit Economics said: “The latest survey findings make further grim reading. The Output Index is consistent with an annual rate of decline in manufacturing production of around 12%, pointing to a further deepening of the recession from the 10% drop seen in the latest available official data for December. Large manufacturers saw a particularly sharp worsening of business conditions in February, leading the declines in both output and employment. The labour market exhibited exceptional weakness during the month, with the PMI survey consistentwith around 30,000 jobs being lost per month.”

The CIPS/Markit UK Manufacturing PMI is based on data compiled from monthly replies to questionnaires sent to purchasing executives in over 600 industrial companies. The panel is stratified geographically and by Standard Industrial Classification (SIC) group, based on theregional, and industry contribution to GDP.