United Kingdom: Manufacturing sector cools slightly in March
April 3, 2017
The manufacturing IHS Markit/CIPS Purchasing Managers’ Index (PMI) dipped from a revised 54.5 in February (previously reported: 54.6) to 54.2 in March. Despite undershooting analysts’ expectations for the third consecutive month and retracting further from December’s high, the index remains comfortably above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for eight consecutive months.
March’s slowdown was driven by more sluggish growth in output and new orders, with consumer goods producers the most affected. In contrast, intermediate and investment goods producers enjoyed faster rates of output growth compared to the prior month. Firms benefited from robust domestic and foreign demand, with the latter supported by the weak sterling exchange rate. Upbeat business sentiment and the healthy operating environment led both SMEs and larger firms to step up the pace of job creation in March. A common theme in recent months has been elevated price pressures, which saw no signs of abating, as firms passed higher raw material costs on to consumers.
According to Rob Dobson, Senior Economist at IHS Markit, “With growth losing further momentum in March, that weaker trend is likely to continue into the second quarter. The latest survey also clearly shows that high costs and weak wage growth are sapping the strength of consumers, with rates of expansion in output and new orders for these products slowing further.”
Author: Oliver Reynolds, Economist