UK manufacturing output eases on subdued demand

The UK’s manufacturing sector faltered last month, a closely-watched survey showed on Monday, as demand softened.

The latest seasonally-adjusted S&P Global CIPS UK manufacturing purchasing managers’ index eased to 47.9 in March from February’s seven-month high of 49.3. It was nominally below both the flash estimate and consensus of 48.0.

A reading above the neutral mark of 50.0 indicates growth while a reading below that suggests contraction. The index has now been below 50.0 for eight successive months.

The survey found output had been scaled back in response to subdued market demand and declining new export orders. There were downturns in both consumer and intermediate goods sectors, although investment goods production rose for the second month in a row.

However, the survey also showed an easing in input inflation, to its lowest level since June 2020, while supply chains also continued to recover. Average vendor lead times improved to the greatest extent in March in the survey’s 31-year history.

Rob Dobson, director at S&P Global Market Intelligence, said: "Companies scaled back production in response to subdued market conditions. Although total new orders saw a fractional increase, this followed on from a nine-month sequence of contraction and suggests that order book levels remain low overall.

"There was better news on the price and supply fronts during March, however.

"This should hopefully filter through to further cost reductions and less the disruption to production workflows in coming months."

John Glen, chief economist at the Chartered Institute of Procurement & Supply, said: "March was a month of two halves, where supplier delivery times saw the biggest improvement for three decades but the continued weakness overall in new order levels dragged manufacturers further back into the abyss of contraction.

"It was the continuing spartan landscape in terms of marketplace opportunity that was largely to blame.

"This is disappointing news for manufacturing companies still experiencing turbulent business times, but optimism in the sector rose to the highest for 13 months."

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: "The sector is not out of the woods, but March’s PMI suggests the downturn is bottoming out.

"The near-term outlook for consumer demand has improved, following the government’s decisions to maintain both the energy price guarantee and fuel duty at its current level in the Spring budget, thereby averting a 1% hit to real incomes.

"But business investment likely will remain weak, due to higher interest rates and the fact the announcement of full capital expensing in the next three years came too year to prevent investment falling sharply at the end of the super-deduction policy.

"Accordingly, we think manufacturing output will flatline over the coming months."

The surveys were sent to a panel of around 650 manufacturers, with data collected between 10 and 28 March.