The UK manufacturing industry continued to grow in March but at a gentler rate than in recent months, according to the CIPS/Markit Purchasing Managers’ Index (PMI).
The headline PMI was 57.1 in March – down from above 61 in January and February. Though this latest figure represents a five month low it remains well above survey averages. Anything above 50 indicates the growth.
The PMI figure takes into account output new orders, levels of stock, employment and delivery times.
The biggest factor in the reduced rate of growth in March was a sharp contraction in new order growth. Companies continued to source more new orders at from both home and export markets but the level of growth was weakened in each.
Output prices continued to rise, as they have now for 19 months in a row, with firms experiencing increases in the input costs of chemicals, cotton, energy, food products, fuel, metals, oil, timber and other commodities. Cost rises were also attributed to supply chain disruption and long delivery times and a shortage in stock holdings.
Nevertheless, firms continued to report steadily rising employment figures.
“The big question is…whether the drop in order book growth represents a gathering in momentum of a more worrying slowdown which, alongside rising inflationary pressures, raises the risk of stagflation,” said Rob Dobson, senior economist at Markit and author of the PMI.
“On the other hand, even after the March easing, manufacturing production looks to have risen 2% in the first quarter, which would be one of the best performances seen over the past 17 years, and the slowdown may simply represent a temporary easing from an unsustainably strong pace at the start of the year.
“The Monetary Policy Committee’s balancing act between growth and inflation has perhaps become even more precarious.”
David Noble, CEO of the Chartered Institute of Purchasing & Supply, added: “Inflation is still ‘enemy number one’ and the problem of phantom demand, whereby purchasers buy greater quantities of scarce raw materials to mitigate against further price rises, is continuing unchecked. Selling prices have now hit record highs as businesses are forced to pass on these costs directly to customers.
“The next few months will be a waiting-game for UK manufacturers. For now, job creation in the sector remains solid but businesses will be monitoring the situation closely. A continued slowdown could start to have an impact on recruitment. Hopes that the UK economy might start to rebalance towards manufacturing seem to be withering on the vine.”