The S&P Global’s Purchasing Manager’s Index (PMI) for last month shows little change from previous releases
The key figure is an overall PMI of 51.0, down from February’s 51.7, indicating a slight easing of already-slow growth, but continued growth nonetheless. The threshold for growth is 50.0, and the industry has barely made it to that threshold since January.
This is the fifth month of overall growth in a row, but issues remain for momentum.
Demand seems to grow but can output meet it?
For the fourth month running, new orders increased, showing a continued resilient demand, but manufacturing output contracted for the first time in six months as the intermediate goods sector saw decline, and growth of consumer and investment goods slowed as well.
Input price inflation saw the highest level in 41 months due to the conflict in Iran spiking energy, oil, and gas prices, with 49% of construction firms reporting rising costs. This is the largest cost spike since 1992.
The Middle East conflict has also affected supplier delivery times to the worst level since mid-2022, as the conflict in Iran, closure of the Strait of Hormuz, and other global supply chain strains delay many materials.
Although the UK construction industry is seeing a meagre growth, these aspects suggest that it is fragile, and the recorded optimism reflects this as it falls to a six-month low.
“Latest round of job cuts is the deepest since last September”
Job losses also saw a rise to the fastest decline since last year, due to rising costs, margin pressure, and declining confidence.
Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing output contracted for the first time in six months in March, as the war in the Middle East and ongoing concerns about domestic economic policy led to a scaling back of production.
“The impact of the war also caused noticeable shifts in the cost and supply chain backdrops. Delivery times lengthened to the greatest extent since mid-2022, while the acceleration in input price inflation was the steepest since the aftermath of the UK’s withdrawal from the ERM in 1992. The resulting high-cost environment and shortages of inputs were also factors stymying production volumes.
“The darker economic and geopolitical backdrop is also weighing on business confidence and hiring trends. Optimism about the year ahead has slumped to a six-month low, and the latest round of job cuts is the deepest since last September.
“The one possible positive is that, despite rising at a slower rate, the trend in new order inflows held up better than production. This suggests that the drop in production is currently more of a supply issue than one caused by an outright downturn in demand, though it’s hard to see how demand can prove resilient in the face of current high energy prices and economic uncertainty unless there’s a swift resolution to the war in the Middle East.”
The PMI can be read in full here.
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