UK manufacturing activity softens in early 2018, says new survey

The Purchasing Managers’ Index came in at 55.1 in the month with the average reading for the first quarter of 2018 the lowest in a year

Ben Chu
Economics Editor
Tuesday 03 April 2018 13:21 BST
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In 2017 exports from the sector were helped by the weakness of pound and also strong demand from the rest of the world
In 2017 exports from the sector were helped by the weakness of pound and also strong demand from the rest of the world (Reuters)

Britain’s manufacturers saw activity soften substantially in early 2018, according to the latest survey snapshot of the sector.

The Purchasing Managers’ Index came in at 55.1 in the month, above the 50 point that separates contraction from expansion and up slightly from the 55 reading registered in February.

However, the average reading for the first quarter of 2018 was the lowest in a year.

In November 2017 the PMI had touched a four-year high of 58.3.

“The latest PMI survey provided further evidence that UK manufacturing has entered a softer growth phase so far this year,” said Rob Dobson of IHS Markit, which compiles the survey.

“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.”

The index of new orders fell to a nine-month low.

“The foundations for the sector’s continuing strength were looking a little more unstable,” said Duncan Brock of the Chartered Institute of Procurement & Supply.

Lowest in a year in Q1 2018

The Office for National Statistics estimates that manufacturing, which accounts for around 10 per cent of UK GDP, expanded by 1.3 per cent in the final quarter of 2017 and by 2.5 per cent over the year as a whole.

Exports from the sector were helped by the weakness of pound and also strong demand from the rest of the world.

“On the basis of past form, the [PMI] output index ... points to a slowdown in manufacturing growth to around 0.5 per cent in Q1, well below the 1 per cent plus rates seen at the end of last year,” said Ruth Gregory of Capital Economics.

Overall UK GDP slowed to 0.4 per cent in the final quarter of 2017.

The March PMI readings for construction and the UK’s dominant services sector will be released later this week.

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