UK manufacturing is staying strong, despite 8-month low

 
Harriet Green
Follow Harriet

Despite the upturn in UK manufacturing remaining solid, activity fell to an eight-month low in March.

Markit showed a reading of 55.3, underlining the cooling of growth from the highs seen last year.

February saw a reading of 56.2, and analysts had expected a reading of 56.9 last month.

“It was always extremely unlikely that the UK was really growing as strongly as the surveys implied late last year”, says Rob Wood of Berenberg, and March’s numbers signal some “degree of normality”.

Source: Markit

The purchasing managers’ index is still well above the long-running average of 51.4 - any figure over 50 signals expansion. It also increased for the 12 months in a row, despite the slowdown.

Wood assures that the recent declines fall back in line with a “more realistic” assessment of Britain’s growth trajectory, which is expanding at a pace a bit above trend.

Production and new orders both carried on rising in March, keeping up the positive start to the year.

The fall today emanated from an erratic slowing in the investment goods sector. But despite being volatile now, numbers could well bounce-back next month, assures Wood.

Source: Markit

Capital Economics points out that the relationship between the survey and official data “has weakened recently”, which means not too much weight should be placed on the readings. It adds:

The weaker tone of the latest survey does little to alter our view that the manufacturing sector will expand by a healthy three per cent or so in 2014.

Wood says the slowing of the pace of export orders expansion could well be related to the weather and the ongoing Crimea situation. This should ease back over coming months, though.

And more, firms are still expanding employment rapidly, suggesting confidence in outlook.