British manufacturing growth slips to 13-month low in March

British manufacturing expanded in March at the weakest pace in 13 months and price pressures, which had previously shown some signs of moderating, worsened, a survey showed on Friday.

The S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 55.2 - revised down from a preliminary “flash” reading of 55.5 - from 58.0 in February.

The survey’s gauge of new orders sank to its lowest level since January 2021, hurt by slowing domestic demand and the sixth drop in seven months for export orders.

Survey compiler S&P Global linked the weakness in export orders to geopolitical tensions, Brexit and ongoing difficulty with supply chains, though delays were their shortest since October 2020.

Overall, the survey pointed to tougher times ahead for Britain’s economy, with growth set to slow amid a global surge in inflation pressure, fuelled by turmoil in commodity markets following Russia’s invasion of Ukraine.

“The end of the opening quarter saw a marked growth slowdown in the UK manufacturing sector,” S&P Global said.

The survey’s indicators of input costs and output prices rose in March after they had receded in previous months from record high levels, pointing to persistent inflation pressure.

Consumer price inflation hit a 30-year high of 6.2 per cent in February and the government’s budget watchdog last week forecast it would go close to 9 per cent in late 2022, contributing to the biggest fall in living standards since at least the 1950s.

British pound: The British pound edged lower against the US dollar on Friday and was on track for a weekly loss of around 0.5 per cent, as optimism surrounding peace talks in Ukraine faded, while UK manufacturing growth hit a 13-month low.

The S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 55.2 in March, revised down from a preliminary reading of 55.5 and below the 58.0 recorded in February. At 0852 GMT, sterling was down 0.2 per cent against the dollar to $1.3125.

Against the euro, sterling was down 0.1 per cent at 84.29 pence, after hitting a three-month low against the single currency on Thursday before recovering.

“It is another very quiet day in the UK data-wise, and there are no Bank of England speakers scheduled,” ING analysts said in a research note.

“The EUR/GBP downtrend may continue in the coming days, and we think a return to 0.8300 remains likely in the near term.”

Meanwhile a surge in demand for workers in Britain is showing some signs of stabilising, according to a survey published on Friday that may provide some comfort to the Bank of England as it worries about the risk of long-term inflation pressure.

The Recruitment and Employment Confederation (REC) said new job postings fell by 25% in the last week of March from a week earlier, returning to the kind of increase seen in mid-January.

“The jobs market has been super-heated in the first few months of this year, and was always likely to stabilise in the spring. We may be seeing the first signs of that now,” REC chief executive Neil Carberry said.

“Over the next few weeks, we will see whether this is the cooling we expected, or a slower market developing as employers factor rising inflation into their plans.”

Staff shortages are a worry for the Bank of England which has raised interest rates at each of its last three meetings to try to stop the jump in inflation to a 30-year high of 6.2 per cent from turning into a longer-term price growth problem.

REC said demand was for hairdressers and barbers as well as security and bar staff and there were also big increases in adverts for other skilled occupations such as veterinarians and crane drivers. The total of 1.83 million active jobs ads had been stable since early March, it said.

British finance minister Rishi Sunak won plaudits for tackling the COVID pandemic with a spending surge but now he faces the trickier task of steering the economy through a cost-of-living squeeze while sticking to his plan to fix the public finances.

Under pressure to do more to help households as inflation heads towards 8 per cent or higher - with Prime Minister Boris Johnson promising to “fix” the hit - Sunak last week announced a package of tax cuts. But Britain’s budget watchdog said those cuts amounted to just one sixth of his previously announced tax increases. Combined with inflation, those tax hikes will contribute to what is expected to be the biggest fall in disposable income this year since at least the 1950s.

Inflation is at a 30-year high of 6.2 per cent and could go as high as 8.7 per cent, the Office for Budget Responsibility watchdog predicts. Sunak says he cannot bring down global oil prices although he has cut fuel duty for the first time since 2011.