UK manufacturing unexpectedly cooled for a third month in March and may weaken further this quarter, according to IHS Markit.
Its factory Purchasing Managers Index declined to 54.2 from 54.5 in February, above the key 50 level that divides expansion from contraction, but below economists’ expectations for an uptick to 55.
The factory survey “compared favourably” to its long-run trend, according to Markit, with the slowdown centred on consumer-goods producers. While manufacturing probably made a “solid contribution” to economic growth in the first quarter, there’s been a definite loss of momentum.
“That weaker trend is likely to continue into the second quarter,” said Rob Dobson, senior economist at Markit.
In March, the weaker pound helped export competitiveness and firms’ confidence remained high. Bank of England deputy governor Ben Broadbent said last month that exporters are enjoying a post-referendum, pre-Brexit “sweet spot” because while sterling has fallen, EU trading arrangements remain in place.
That may slowly change after British prime minister Theresa May kickstarted the formal process of withdrawing from the EU last week.
While the currency’s depreciation since the June vote to leave the EU is helping the sector, there may not be a big enough boost to offset an expected slowdown in consumer spending.
The pound’s impact on inflation also remains an issue for companies, with elevated price pressures in March, according to Markit. A measure of output prices edged back toward the near-record high seen in January.
Bloomberg
