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UK manufacturing growth hits 10-year high in March

UK manufacturing growth hit a 10-year high in March thanks to the swift vaccine rollout and the planned easing of lockdown restrictions, according to a survey released on Thursday.
The IHS Markit CIPS manufacturing purchasing managers’ index rose from 55.1 in February to 58.9 in March – its best level since February 2011.A level below 50.0 signals contraction, while a level above indicates expansion.

March saw the fastest output growth since late last year, as inflows of new business from both domestic and overseas markets strengthened. Nevertheless, the manufacturing remained beset by severe supply chain and logistic issues, leading to delivery delays from suppliers and disruption to production and distribution schedules.

Rob Dobson, director at IHS Markit, said: “Signs of Spring have appeared in the UK manufacturing sector, with the PMI hitting its highest level in a decade. Growth of output, order books and employment all gathered momentum and optimism about the year ahead improved further.

“The domestic market remained the prime source of new orders, as companies reported that the vaccine roll-out and clients’ preparations for the loosening of lockdown restrictions underpinned the expansion. Many expect this process to be supportive during the year ahead as well, raising business optimism and jobs growth to their highest levels for seven years.

“Weak export sales and supply-chain issues are likely to remain constraints on growth moving forward, however, with shipping issues already leading to severe disruption to production schedules, raw material availability and the onward distribution of finished products to clients, especially abroad.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the survey suggests that manufacturing output could return to its pre-Covid level soon, having been 5.2% below it in January.

He pointed out that had it not been for Brexit, the rebound would be much stronger.

“At 57.0, the total orders balance is 7.3 points below the Eurozone’s, the largest underperformance since July 2000. The weakness is concentrated in export orders, the balance for which rose only to 50.5 in March, from 49.2 in February. Admittedly, orders are weak partly because EU businesses stockpiled UK goods towards the end of last year, due to the risk of a no-deal Brexit, and so are now running down these inventories, instead of placing new orders.

“In addition, firms will get better at navigating the new trade rules with time. Nonetheless, the additional frictions introduced by Brexit inevitably will mean that UK manufacturers lose market share over the coming year.”

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