UK manufacturers see growth weaken

1 April 2011

1 April 2011 | Lindsay Clark

Struggling with higher prices, UK manufacturers witnessed slowing growth in March, a buyers’ survey found.

While still above the crucial 50 no-change mark, the Markit/CIPS Manufacturing PMI recorded 57.1 last month, which was significantly weaker than January’s record high of 61.2. February’s revised PMI was 60.9.

Growth of new orders eased sharply, especially at consumer goods producers, while cost inflation led to output prices rising at a record high rate, the report said.

Rob Dobson, senior economist at Markit, said: “Manufacturers reported an unwelcome combination of slower growth and rising price pressures in March.

“Although growth of production remained sufficiently strong to generate another near-record increase in employment, the pace moderated further from January’s high, linked to a slump in the rate of growth of new orders, especially from domestic customers.

“At the same time, persistent high oil prices due to the unrest in the Middle East and North Africa, rising global prices for many other raw materials and higher import prices due to the weak pound all led to a survey-record rise in prices charged by manufacturers,” Dobson said.

The mini-boom in UK manufacturing ran out of steam during March, said CIPS CEO David Noble.

“Set against a strong order book across the whole of Q1, it’s concerning to see inflows of new orders, particularly for consumer goods within the domestic market, easing sharply at the end of the quarter.

“Inflation is still ‘enemy number one’ and the problem of phantom demand, whereby purchasers buy greater quantities of scarce raw materials to mitigate against further price rises, is continuing unchecked. Selling prices have now hit record highs as businesses are forced to pass on these costs directly to customers,” Noble said.

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