Manufacturing activity weakens to lowest level in a year over first quarter

Activity in Britain's manufacturing sector weakened in the first quarter to its lowest level in a year, as a slowdown in the rate of new orders dragged on industry performance in March.

The Markit/CIPS UK Manufacturing purchasing managers' index (PMI) showed a reading of 55.1 last month, slightly higher than 55.0 in February, and surpassing economist forecasts for 54.7.

A reading above 50 indicates growth.

However, it was not enough to bolster first quarter results.

"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," the report explained.

Rob Dobson, director at IHS Markit which compiles the survey, said: "The latest PMI survey provided further evidence that UK manufacturing has entered a softer growth phase so far this year.

"Although the pace of output expansion ticked higher in March, which is especially encouraging given the heavy snowfall during the month, this was offset by slower increases in new orders and employment.

"Average rates of increase over the opening quarter as a whole are also down noticeably from the growth spurt seen at the end of 2017."

Sterling was little changed against peers after PMI release, with the pound trading 0.2% higher against the US dollar at 1.407 and up 0.1% versus the euro at 1.143.

There were "solid inflows" of new work from both domestic and overseas markets last month thanks to successful marketing campaigns, the weaker pound and improved sales volumes to existing clients - though the rate of new export orders eased to a five month low.

Staffing levels did rise for the twentieth successive month, but did so at the slowest rate during the year so far.

Price pressures eased in March as input costs and output charges rose at their weakest rate in the year to date - though the report highlighted that the pace of inflation was "still relatively strong."

High costs were linked to raw material shortages, supply chain disruption and rising commodity prices.

While manufacturers were upbeat about future conformance, with nearly 55% of companies forecasting higher output in 12 months' time, experts are weary about the sector outlook.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), said: "Without a significant rise in new orders, and if supply chains are still disrupted by shortages or the weather, for the next few months it's anticipated that there will be a continued muted pace of growth.

"A rather apathetic prediction, but while optimism remains high and the sector continues its efforts to increase marketing activity and launch new products, everything could change."

Howard Archer, chief economic advisor for EY ITEM Club, said domestic conditions could prove particularly difficult in the coming months.

"On the domestic demand front, still limited (albeit gradually improving) consumer purchasing power and business caution over investment amid significant uncertainties are a challenging combination for manufacturers," he said.

"This has been reinforced by increased prices for big-ticket consumer durable goods and capital goods."

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