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UK manufacturing expands for the first time since 2022

02 April, 2024

The UK manufacturing sector showed tentative signs of recovery in March, as output and new orders increased following year-long downturns. The seasonally adjusted S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) rose to a 20-month high of 50.3 in March, up from 47.5 in February – the first time the PMI has risen above the neutral 50.0 mark since July 2022. Business optimism about the year ahead hit an 11-month high.

Manufacturing production increased for the first time since February 2023, as output growth in the consumer goods sector more than offset downturns in the intermediate and investment goods categories.

The mild uptick in new business inflows was centred on the domestic market. New export orders remain comparatively weak, with overseas demand falling for the 26th successive month – but at the slowest pace since April 2023.

“The end of the first quarter saw UK manufacturing recover from its recent doldrums,” comments Rob Dobson, director at S&P Global Market Intelligence. “Production and new orders returned to growth, albeit only hesitantly, following year-long downturns, with the main thrust of the expansion coming from stronger domestic demand.

“The upturn in demand also led to improved confidence among manufacturers, with positive sentiment hitting an 11-month high,” he adds. “Some 58% of companies expect their output to rise over the coming year.” Only 7% are anticipating a contraction.

“We’re also seeing signs of stabilisations in employment and purchasing activity alongside a move towards lowering safety stocks – all signs that manufacturers are tentatively optimistic about the road ahead.

The UK Manufacturing PMI has risen above the critical 50.0 level for the first time since 2022
Source: S&P Global PMI

“Potential blockers remain such as continued weak export performance and supply chain stresses, with the neighbouring EU market the main drag on overseas demand and the Red Sea crisis still impacting supply chains,” Dobson points out. “Signs from the survey that the impact of both of these factors is easing is therefore welcome news.”

According to James Brougham, senior economist at Make UK, the latest PMI figures “show that manufacturing can return to a growth footing despite a challenging business environment, although lead times remain elevated as Red Sea disruptions continue to cast doubt on the security of supply chains and, interest rates remain relatively high.

“Nevertheless, manufacturers are now hardened to the disruptive business environment they have had to endure over the past four years,” he adds. “Despite the ongoing domestic political uncertainty which is putting the brakes on investment decisions this resilience means they are well placed to make the most of improving conditions in the year ahead.”

• In Europe, German manufacturing remains in the doldrums with a PMI of 41.9 (a five-month low), but Italy returned to positive territory with a PMI of 50.4 (a 12-month high). Italy is on 50.4 and France on 46.2.

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