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Manufacturing growth slows slightly in the UK

01 April, 2014

The seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) for UK manufacturing eased to an eight-month low of 55.3 in March, signalling a further cooling of growth from the peaks achieved towards the end of last year. However, the PMI remains well above its long-term average of 51.4, recording an improvement in operating conditions in each of the past 12 months.

Manufacturers continued to scale up production, and output has also risen for the past 12 months, underpinned by rising levels of new orders, most of which are still coming from the domestic market. New export orders weakened further, with March signalling the slowest growth for ten months.

Rates of increase for output and new business cooled further from the highs registered during the second half of last year.

Manufacturing employment increased for the 11th consecutive month during March, with the rate of jobs growth staying close to February’s near three-year high.

“The latest Manufacturing PMI is likely to disappoint the markets, coming in a more than a full index point below expectations,” comments Rob Dobson, senior economist at survey compiler Markit, “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 recovery remains solid and continues to drive strong job creation.

“Even with the slower pace of expansion, the goods-producing sector is on course to provide a further boost to the overall economy in the first quarter, for which we expect the economy to grow by at least 0.7%.

How the UK manufacturing PMI has varied in recent years (50 = no change)
Source: Markit/CIPS

“The old criticisms still apply, however, with the survey signalling a downturn in export growth and an expansion that is all-too reliant on domestic consumers,” Dobson adds. “However, the very fact that we have a healthy manufacturing economy that is generating jobs at a rate rarely seen in recent decades suggests that the rebalancing process is underway.

“We may be still a consumption-oriented economy in many respects, but at least we now appear to be producing more of the goods we sell ourselves, which is a more sustainable situation to be in.”

David Noble, CEO of the Chartered Institute of Purchasing & Supply says: “In spite of softer rates of expansion, UK manufacturing held its ground in March, benefitting from 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 11 consecutive months, has enabled the sector to maintain momentum,” he adds. “The Budget’s support for manufacturers should also help boost confidence even further, but it remains to be seen what this will deliver in the long term.”

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