The seasonally adjusted Markit/CIPS Purchasing Managers Index® (PMI®) came in at an eight month low of 55.3 in March, although above the long term average of 51.4 it is about a percentage point below expectations.
Average inputs costs fell for the first time in 18 months though, on reports from companies that commodity prices were easing. This and strong competition has led to some manufacturers holding off from raising prices said Markt/CIPS.
Manufacturing output has increased over the last year as new orders come in but the rate of increase has slowed.
Employment in the manufacturing sector has increased again making it the eleventh monthly increase in a row.
Rob Dobson, Senior Economist at survey compilers Markit said:
“The latest Manufacturing PMI is likely to disappoint the markets, coming in a more than a full index point below expectations, but it’s important to remember that this is in the context of the super- strong, near-record growth rates seen in the second half of last year. Growth is merely hot rather than scorching, and the take home messages from the March survey are that the recovery remains solid and continues to drive strong job creation."
David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply said:
“In spite of softer rates of expansion, UK manufacturing held its ground in March benefitting from ongoing improved operating conditions. Leading the way to growth was the strong domestic market which, alongside robust consumer and intermediate production, was able to offset this month’s slower growth in both overseas demand and the investment goods output. The ongoing boost in job numbers, which has now been recorded for eleven consecutive months, has enabled the sector to maintain momentum."
Martin Beck senior economic adviser to the EY ITEM Club, commented:
“Today’s PMI for manufacturing, which hit an eight-month low, is somewhat disappointing, particularly when we look at the finer details. A moderation in both export demand and output of investment goods suggest the recovery is still heavily dependent on the consumer. This has slightly dampened the mood following the latest set of national accounts, which showed some broadening out of activity beyond the consumer. Adverse exchange rate movements are likely to have contributed to the softening of export demand.
“The overall story is positive however. Today’s underwhelming number falls against a backdrop of very strong PMI numbers in recent months. The sector is still performing well above its historical average, and will contribute towards positive GDP growth in Q1.
“Lower energy and commodity prices are enabling firms to leave prices unchanged, which should help to keep domestic inflation under wraps. The sector also continues to soak up workers, suggesting sustained optimism about the economic outlook. Rising employment will support both household spending power and consumer confidence, helping to drive consumer spending over the coming months.”