UK manufacturing PMI misses expectations in March, output and new orders lose further impetus

UK's seasonally adjusted Markit/CIPS Purchasing Managers’ Index (PMI) slipped to a four-month low of 54.2 in March, down from 54.5 in February. The latest PMI reading stood above its long-run trend of 51.6. The rate of increase in manufacturing production eased to its weakest during the current eight-month sequence of expansion.

Export orders grew more slowly and demand for consumer goods faltered against a backdrop of rising inflation pressures. Part of the increase in new orders reflected further growth of foreign demand.

The outlook for the sector also remained positive, with business optimism rising to a ten-month high. Almost 52 percent of companies forecast increased production in 12 months’ time, compared to only 6 percent anticipating a decrease.

Firms expanded employment during March. Hiring rose for the eighth month running with the pace of jobs growth improving to its fastest in almost a year-and-a-half. Employment increased at both SMEs and larger-scale producers. Price pressures remained elevated during March. Output charge inflation ticked slightly higher, while input costs also increased at one of the quickest rates in the survey history.

“The survey data suggest that the goods-producing sector made a solid contribution to GDP during the opening quarter of 2017. However, it’s clear that the expansion will be less than the buoyant 1.3% rise seen in the fourth quarter of last year," said Rob Dobson, Senior Economist at IHS Markit.