The UK manufacturing sector slowed in March 2017, but performance remains strong and figures remain above average.
The latest Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) posted at 54.2 in March 2017, lower than February’s figure of 54.6; displaying a slowdown in output and new order growth since the record results seen at the end of 2016.
Johnson goes on to say, “Rates of growth in the industry remain above average, which is a positive sign, and shows the resilience of the UK manufacturing industry.”
New business came mostly from the domestic market, with a weak Pound once again helping to boost exports. The industry continues to see plenty of new orders coming in, noting continued growth in overseas demand.
The increase in UK manufacturing production slowed for the first time in nine months, with consumer goods producers the most affected, demonstrating only small levels of output growth. This is in contrast to February 2017, when consumer goods noted a positive increase in new orders. The intermediate and investment goods sectors, who saw significant growth in February, continued to see improvement and again recorded a significant boost in the last month.
Still a positive outlook for the UK manufacturing industry
The outlook for the industry remains positive, with rising business confidence at the highest level for almost a year. Attitudes remain positive and demonstrate an upturn in optimism since February, with over 50 percent of companies now predicting an increase in production over the coming year, and only six percent forecasting a slowdown.
A positive outlook has contributed to employment in the UK manufacturing sector, with headcounts rising for the eighth month in a row in both SMEs and larger businesses. Jobs growth has increased at the fastest pace for a year-and-a-half.
Price pressures still a concern
Price pressures remain an issue for the sector, with costs elevated throughout March and output charge inflation on the up, edging closer to the record high recorded in January 2017. This was largely due to the increased costs of raw materials pushing up vending prices. Input costs grew at one of the fastest rates since the survey began, although this has weakened over the last six months. Manufacturers cited the weak Pound and ever-increasing commodity prices as the reasons for increasing costs, in addition to the knock-on effects of supply chain pressures, with vendor led times at the longest for nearly six years.
Atul Kariya, National Sector Head of Manufacturing and Engineering at MHA Macintyre Hudson, commented,
“The real concerns for UK manufacturers in the current marketplace are the cost pressures – from uncertain currency markets, increasing commodity prices, and additional costs across the supply chain.”
“Lack of certainty about whether these costs can be passed on to customers means that manufacturers are having to look inwardly at their processes and business models to find efficiencies wherever possible.”
Neil Lloyd, Sales Director at manufacturing expert solicitors, FBC Manby Bowdler, commented, “Whilst the weak sterling exchange rate continues to bring in the new work for UK manufacturers, the reports on strong domestic demand are welcome, and a sign that consumer spending has not yet been impacted by the steady rise in inflation.”
“It’s pleasing to see that job creation has remained strong across both the small and large businesses, a trend we’ve noticed in our own client base, which shows a greater demand for HR advice than ever before. The levels of optimising are encouraging and I hope will continue, despite all the uncertainty that’s bound to arise from the triggering of the Article 50.”
David Johnson observed, “I’m delighted to see continued confidence in the UK manufacturing sector. In the face of the ever-evolving European political and economic landscape, volatile exchange rates and continued uncertainty around the UK’s Brexit negotiations with the EU and its other key trading partners, such optimism is very encouraging indeed and yet Sterling is only just starting to reflect that.”
“As we have warned before, rising price pressures across industry could dampen the sector’s enthusiasm and performance, so this needs to be watched carefully and taken into consideration in both business and currency planning.”
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