The UK manufacturing sector maintained a steady pace of expansion during March, according to the latest Markit/CIPS Purchasing Managers’ Index (PMI).
Output growth for UK manufacturers reportedly picked up, although this was offset by slower increases in both new orders and employment, according to the new PMI.
On the price front, rates of inflation in input costs and output charges remained elevated despite easing slightly since February.
The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) posted 55.1 in March, little-changed from 55.0 in February.
The average reading over the opening quarter as a whole (55.1) was the weakest in a year, suggesting that the underlying pace of expansion has been generally slower since the start 2018.
Manufacturing production rose for the twentieth successive month in March. The rate of expansion accelerated to the sharpest in the year-so-far, despite a moderation in growth of incoming new orders.
Similar to the trend in the headline PMI, average rates of expansion in production and new business over quarter one was lower than in recent quarters, suggesting that the underlying strength of the upturn has downshifted since the turn of the year.
Companies continued to report solid inflows of new work from both domestic and overseas markets in March. New export orders rose for the twenty-third month running, with the rate of increase slightly above the average for the sequence (despite easing to a five-month low).
The latest expansion in new export business was linked to successful marketing campaigns, a favourable exchange rate and improved sales volumes to existing clients.
Staffing levels rose for the twentieth month
The report has shown, that staffing levels rose for the twentieth month running in March, albeit at the slowest pace during the year-so-far.
Higher employment combined with a mild deceleration in the rate of expansion in new orders meant that companies made further inroads into backlogs of work. Outstanding business fell marginally during the latest survey month.
Price pressures moderated in March, with rates of increase in input costs and output charges both decelerating.
Although purchase prices rose to the weakest extent in the year-to-date, the pace of inflation was still relatively strong. Higher costs reflected raw material shortages, supply chain disruption and rising commodity prices.
Average vendor performance deteriorated sharply, mainly attributed to ongoing supply-chain disruption, including shortages of certain inputs.
There was also mention of weather-related delays. Manufacturers maintained a positive outlook in March. Almost 55% of companies forecast that output will be higher in 12 months’ time.
The latest comments:
Mike Rigby, head of Manufacturing at Barclays, said: “Production in the sector may be lagging compared to the closing months of last year but UK manufacturing output remains in positive territory with demand still strong. That said, although the sector remains positive, the continuing uncertainty over Brexit negotiations can’t be helping the investment intentions of manufacturers who are looking for some degree of clarity over the future relationship with the EU sooner rather than later. Manufacturers will also need to remain flexible in their planning as they negotiate the uncertain market conditions in 2018.
“With current Barclays data highlighting the premia that international consumers are prepared to pay for British goods, and given the continuing improvement in key overseas markets, manufacturing businesses should be increasingly focusing on differentiating their products on quality and service.”
Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking, said: “The PMI figure shows a sector set for expansion with a second consecutive month of growth.
“While data suggests that the demand from those capitalising on cheaper UK exports has peaked, levels remain high and continue to support order books. Firms are indicating that domestic demand is growing too.
“Productivity continues to be top of the agenda for many manufacturers, who rightly see improving it as key to more profitable growth. Many are beginning to invest, which in turn should support job creation. Looking further ahead, the sector is on track to repeat the success of last year and outperform UK GDP growth in 2018, a feat achieved only once since 2011.”
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