The UK manufacturing sector fell back into contraction territory in March, as output declined following a slight increase in February according to the S&P Global/CIPS manufacturing PMI.
The PMI fell to 47.9 in March, down from February's seven-month high of 49.3 and the earlier flash estimate of 48.0. The PMI has stayed below the neutral 50.0 mark for eight successive months.
Market conditions remained subdued overall, as new export business decreased and overall new order books posted only fractional growth.
????????#UK’s manufacturing registered a sustained and stronger contraction in March (#PMI at 47.9; Feb: 49.3) as output was scaled back in response to subdued market demand. Read more: https://t.co/M2fL67nl2S pic.twitter.com/lDBdzNpGfp
— S&P Global PMI™ (@SPGlobalPMI) April 3, 2023
However, there was positive news on the price and supply fronts as cost inflation eased and average supplier lead times improved to the greatest extent in survey history.
Business optimism also strengthened to a 13-month high, with almost 60% of manufacturers forecasting output to rise over the coming year.
Rob Dobson, Director at S&P said: “UK manufacturing production fell back into contraction at the end of the opening quarter, as companies scaled back production in response to subdued market conditions.”
“Although total new orders saw a fractional increase, this followed on from a nine-month sequence of contraction and suggests that order book levels remain low overall.”
Gabriella Dickens at Pantheon Macroeconomics felt while the “manufacturing sector is not out of the woods just yet, March’s PMI suggests that the downturn now is bottoming out.”
She highlighted that the new orders index rose back above 50.0 for the first time since May 2022 while manufacturers also were the most upbeat about the 12-month outlook since February 2022.
She did caution however that manufacturing output still was boosted in March by the firms working through order backlogs; this support won’t last much longer.
The EY Item Club agreed the rise in new orders and business optimism "suggest there may be some light at the end of the tunnel for the sector," but added current headwinds mean this is unlikely until the second half of the year.