Manufacturing sector shrinks again as firms scale back against low orders

The UK’s manufacturing sector contracted further in March amid subdued demand, but supplier delivery times showed the biggest improvement in more than three decades.

It was a month of “two halves”, according to the closely followed Manufacturing PMI survey, which recorded another period of contraction for the hard-hit industry.

The survey, compiled by S&P Global and CIPS UK, scored 47.9 in March, down from February’s seven-month high of 49.3 and the flash estimate of 48.

Any score below 50 is considered a contraction, meaning the sector has been in decline for eight months in a row.

In March, the downturn in output was driven by declines in consumer and intermediate goods – such as ingredients or raw materials that are used to make a finished product.

Furthermore, foreign demand for UK manufactured goods contracted for the 14th month in a row, the survey found, with manufacturers reporting weaker demand from the US, Europe and China, as well as subdued global economic conditions.

However, the data revealed important signs of improvement for the industry, with selling price inflation easing to its lowest rate since June 2020.

Businesses reported seeing better availability of resources, reduced supply chain constraints, and lower costs for certain commodities which led to lower prices in some cases.

Average supplier delivery times also saw the biggest improvement in the survey’s history of 31 years, following a prolonged period of delays worsened by the Covid pandemic and Russia’s invasion of Ukraine.

Dr John Glen, chief economist at the Chartered Institute of Procurement & Supply (CIPS), said: “March was a month of two halves where supplier delivery times saw the biggest improvement for three decades but the continued weakness overall in new order levels dragged manufacturers further back into the abyss of contraction.

“It was the continuing spartan landscape in terms of marketplace opportunity that was largely to blame.”

Rob Dobson, director at S&P Global Market Intelligence, said: “Supply chains also continued to recover from the immense pressure experienced over the past three-and-a-half years, with March seeing average vendor lead times improve to the greatest extent during the 31-year survey history.

“This should hopefully filter through to further cost reductions and lessen the disruption to production workflows in coming months.”

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