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Manufacturing growth hits decade high

UK manufacturing reached its highest monthly growth levels in a decade during March as the economy continues to recover, although significant supply chain disruptions remain across the sector.

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The monthly IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) rose to 58.9 in March, its highest level since February 2011. Above the 50-point mark indicates growth in the sector. At the height of the pandemic in early 2020, the index had dropped as low as 32.

The decade-high performance in March was driven by improved output growth, new orders, rising employment and high demand for raw materials.

For the first time in 2021, consumer goods production returned to positive growth, with accelerated expansion also recorded in the intermediate and investment goods industries.

New orders rose at the fastest monthly pace for over three years. Companies reported improved demand both domestically and, to a lesser extent, overseas.

Backlogs of work also increased at the fastest rate for over a decade, while increased optimism about the future resulted in employment growth reaching a seven-year high.

Some companies reported that their customers were ordering early to guard against future price rises and further supply chain disruptions, which remain an ongoing issue.

Raw material shortages and disrupted production schedules caused by COVID-19 restrictions continued to be exacerbated by difficulties with the onward distribution of finished goods associated with EU Exit. The PMI survey was also largely complete before the Suez canal blockage at the end of March.

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Duncan Brock, Group Director at the Chartered Institute of Procurement and Supply (CIPS), said “green shoots of recovery” were starting to appear across the manufacturing sector:

“Manufacturers picked up the pace [in March] to meet new orders rising at the fastest levels for three years, with the domestic pipeline of work strengthening and previously deflated export orders bouncing back across the board, including from the EU.

“In turn, suppliers were under the cosh to keep up as the list of shortages in raw materials increased, leading to the second-greatest lengthening of delivery times in the history of the survey.

“These low points did not divert the sector from its enthusiasm about the coming year. All in all, [March represented] a great end to the first quarter.”

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