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Growth in the UK’s manufacturing sector slowed in the first quarter, according to a key business survey, which showed firms reporting a second successive month of disappointing activity in March.
The purchasing managers’ index for the manufacturing sector fell to 54.2, down from the previous month’s 54.6. Economists had expected the figure to rise to 55.
Despite the relative disappointment, however, IHS Markit described the overall performance as “solid”, with rates of expansion in output and new orders still above their long-run average.
The pound slipped 0.3 per cent against the dollar to a daily low of $1.2510 following the release.
Survey respondents benefited from higher foreign demand encouraged by the weaker pound.
The Bank of England’s deputy governor Ben Broadbent last month argued that British manufactures are currently in a “sweet spot” where they can benefit from the weaker pound while still enjoying full access to the European single market.
IHS Markit surveyed firms on indicators including orders, hiring and inventories to get a picture of the overall health of the sector. A reading over 50 indicates growth over the month, with the surveys closely tracking official GDP numbers.
Rob Dobson, IHS Markit senior economist, said manufacturers are likely to have made a “solid contribution to GDP” during the first quarter overall, but “it’s clear that the expansion will be less than the buoyant 1.3 per cent rise seen in the fourth quarter of last year”.
With growth losing further momentum in March, that weaker trend is likely to continue into the second quarter. The latest survey also clearly shows that high costs and weak wage growth are sapping the strength of consumers, with rates of expansion in output and new orders for these products slowing further.