Economic activity as measured by IHS Markit’s Purchase Managers Index showed a broad based decline across the manufacturing, construction and services sector in the UK during the month of March.
Combined, the ‘all sector PMI’ that measures all three sectors was seen sliding to a 20-month low in the month of March and including weaker pace of growth in employment and new order growth. Interestingly, price pressures were seen picking up from the lows registered in February. Overall the March UK PMI registers slowest pace of growth.
For the most part, Markit attributed the weaker pace of increase due to the bad weather which curbed business growth during the period. While economists are hopeful that there could be a rebound across all sectors in April, the fact that business expectations turned sour for March suggested that the underlying trends still remains weak when it comes to forecasting future activity in the sectors.
The all sector PMI was seen easing to 52.1 in March, down from February’s reading of 54.2. This was the lowest point in the index since July 2016, according to Markit’s official statement. The UK had voted leave the EU in June 2016. Based on the PMI data, the UK’s GDP is expected to be around just 0.3% during the quarter with the month of March dragging the GDP down by almost 0.15 percentage points.
UK manufacturing PMI signals steady pace of growth
Manufacturing activity in the UK for the month of March was one of the better performing indicators. Data from Markit showed that manufacturing activity as measured by the PMI registered a reading of 55.1 in March which was little changed from February’s 55.0 print.
The PMI data for March brought down the average PMI to the weakest in a year at 55.1 on the whole. Data showed that both input and output price inflation had weakened, which was in strong contrast to the services sector. The rate of expansion was seen accelerating at the fastest pace in this year so far.
UK construction sector contracts, falling below 50-level
Construction activity was the hardest hit in the month of March as civil engineering projects declined at the fastest pace suggesting that the bad weather played a major role in curbing activity in the construction sector.
Markit’s construction PMI was seen falling to 47.0 in March, marking a sharp decline from 51.4 in February. This was the first contraction registered in the sector in nearly six months and the decline was the fastest seen since July 2016.
Respondents said that the bad weather disrupted staff and activity. There were declines in both civil and commercial activity with the exception of the housing activity which registered a modest upturn during the month.
The construction companies noted that there was a significant decline in the business volumes as well during the period. Despite the overall slowdown, the construction sector registered positive employment growth during the month as employment activity rose to a three month high.
UK services sector posts the weakest increase in 20-months
The services sector data released over the week showed that activity slowed to a 20-month low. The services PMI fell in March to register a reading of 51.7, down from February’s 54.5.
Most of the respondents to the survey attributed the weakness due to the temporary disruptions caused by bad weather which held back business growth. Businesses were also wary about heightened uncertainty surrounding global trade.
On the other hand, input cost inflation was seen to have remained strong in the services sector marked by an increase in operating expenses which surged at the fastest pace since December 2017. Employment growth was seen to be moderate with businesses noting that due to the shrinking labor, it was more difficult to fill vacancies.
There was also significant backlog of work orders which increased for the third consecutive month in March.