Data published by S&P Global/CIPS showed that business activity in the UK manufacturing sector rose strongly in March, exceeding economists' forecasts and moving into expansion territory for the first time since July 2022. Meanwhile, rates of contract in employment and purchasing activity are slowing sharply and business optimism about the year-ahead outlook hitting an 11-month high.
UK manufacturing PMI rose to 50.3 points from 47.5 points in February. A value above 50 points indicates an expansion of activity in the sector. Economists had expected an increase to 49.9 points.
The report also showed that three of the PMI sub-components (new orders, output and suppliers' delivery times) were consistent with an improvement in overall operating conditions. Although the sub-indices tracking employment and stocks of purchases both signaled ongoing downturns, rates of contraction eased sharply since February. Manufacturing production increased for the first time since February 2023, while new orders also increased. New export orders fell again, but at the weakest pace since April 2023. Meanwhile, business optimism has risen to its highest level since April 2023: 58% of manufacturers expect an increase in production in the next 12 months, and only 7% expect a reduction. The improved sentiment reflects signs of stronger demand, new product launches, improved terms of trade, export opportunities, and hopes that the price and supply situation will return to normal. The data also showed that manufacturers saw upward pressure on both input costs and output charges during March. Although only moderate, the rate of purchase price inflation was the fastest for a year. Companies acted to protect margins by raising selling prices for the fifth successive month.