UK manufacturing expansion is weakest for a year, survey reveals
UK manufacturing activity expanded at its weakest pace for a year in the first quarter, and growth in employment and new orders in the sector slowed appreciably last month, a key survey shows.
The Chartered Institute of Procurement & Supply’s purchasing managers’ index (PMI) for UK manufacturing, a composite measure of changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased, edged up from a downwardly revised 55 in February to 55.1 in March.
This signalled a marginally faster pace of expansion, and the index remained well above the level of 50 deemed to separate expansion from contraction. However, the rate of activity growth signalled for March was slower than that indicated by the previous PMI reading for February of 55.2.
CIPS noted the average PMI reading for the January to March period, of 55.1, was the lowest for any rolling three-month period since the opening quarter of 2017. The survey thus signals the weakest UK manufacturing growth for any rolling threemonth period for a year, in terms of this composite measure of activity.
However, CIPS took some encouragement from the resilience of March manufacturing activity in the face of extreme winter weather.
Rob Dobson, director at survey compiler IHS Markit, 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.”
He added: “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. Compared to official data, the performance through quarter one is consistent with only a 0.4 per cent to 0.5% gain in production volumes, a considerable slide from the fourth quarter’s 1.3% increase.“
Manufacturing, with this 1.3% quar- ter-on-quarter jump in output on the official measure, was a key driver of the sluggish 0.4% growth in overall UK gross domestic product in the fourth quarter.
Figures published last week by the Office for National Statistics show the UK services sector grew by only 0.4% in the fourth quarter, while construction output fell 0.1%.
CIPS’S manufacturing employment index fell from 54.3 in February to 53 last month, to signal a significant slowing of the rate of increase to the weakest pace so far this year. The new orders index dropped from 57 to 55.3 to signal the weakest increase in nine months. And the index for new export orders eased from 54.8 to 54.6, to signal the slowest pace of increase since last October.
However, the manufacturing output index rose to 56.9 last month, its highest since December, having fallen from 55.8 in January to 54.4 in February.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, said: “The manufacturing PMI averaged 55.1 in the first quarter of 2018, which was down from an average of 56.8 in the fourth quarter of 2017 and was the weakest performance since the first quarter of 2017.
“While still a very decent performance, this points to the manufacturing sector losing some momentum from the heady growth rates seen in the second half of 2017.”
He added: “Output growth picked up modestly to a three-month high in March, although it remained below the average level seen over 2017. However, disappointing new orders growth slowed to a nine-month low in March. This seems to have been primarily due to a softening in domestic demand. [Growth in] export orders slowed modestly in March [to] a five-month low.
“Employment growth in the sector was also at the lowest level since last December, and at the equal-lowest level since June 2017.”
Mr Dobson noted business optimism among manufacturers was “holding steady at an elevated level” in the survey, with more than 54% of companies expecting output to expand over the coming 12 months.
This points to the sector losing some momentum from the heady rates