United Kingdom: Services PMI weakens substantially in March, while manufacturing PMI inches up
Growth in the UK services sector lost steam in March, with the headline figure signaling the weakest expansion in over a year and a half. The IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) fell to 51.7 in March from 54.5 in February, markedly below market expectations of 54.0. However, the indicator remains above the 50-point threshold that separates expansion from contraction, where it has been for 20 consecutive months.
The slowdown in March was likely due in part to poor weather conditions, which bogged down business activity growth. In addition, economic uncertainty was noted by participants as a contributor to the slowdown. New orders grew at the slowest pace in 20 months on the back of weaker consumer demand and delayed spending by clients. In response, employment rose at a slower pace in March. Backlogs of work continued to edge up, due to disruptions caused by weather conditions. In term of prices, input price inflation rose and output prices grew at the quickest pace in three months.
Chris Williamson, Chief Business Economist at IHS Markit, commented:
“The UK economy iced up in March, suffering the weakest increase in business activity since the Brexit vote amid widespread disruptions caused by some of the heaviest snowfall in years. As a result, economic growth will likely have been adversely affected.”
In contrast to the performance of the services sector, the IHS Markit/CIPS manufacturing PMI increased from a revised 55.0 in February (previously reported: 55.2) to 55.1 in March. The index remains well above the 50-point threshold that separates expansion from contraction in activity in the manufacturing sector, where it has been since August 2016.
The slight pick-up in March’s headline figure was driven by stronger output growth. The improvement was moderated, however, by softer growth in employment and new work. The slower pace of new orders growth resulted in shorter backlogs of work. Regarding prices, input and output prices rose in March, albeit at a slower pace than in the previous month. Input price inflation remains elevated due to raw material shortages and higher commodity prices.