Britain’s manufacturing sector lost momentum in March even as selling prices surged to new highs, casting doubt over the strength of the economic recovery.
The Markit/CIPS Manufacturing index fell to a five-month low of 57.1 in March, from a record 61.2 in January and 60.9 in February. New orders rose at the weakest pace since last October.
Average selling prices increased at the fastest pace since data were first collected in November 1999 as manufacturers tried to pass on the rising costs of raw materials. Average input prices rose for the nineteenth consecutive month, driven by prices of chemicals, cotton, energy, food products, fuel, metals, oil and timber.
The overall activity reading for industry was well above its long-run average of 51.3 and showed that manufacturing was still firmly in growth territory. Staffing levels increased at the second-fastest pace in the survey’s history.
However, the survey contained signs that the sharp rise in manufacturing growth may be past its best, amid questions over British consumer demand, the impact of the oil price surge and the knock-on effects of the Japanese earthquake on global industry.
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Rob Dobson, senior economist at Markit, said: “Although growth of production remained sufficiently strong to generate another near-record increase in employment, the pace moderated further from January’s high, linked to a slump in the rate of growth of new orders, especially from domestic customers.
“The big question is, therefore, whether the drop in order-book growth represents a gathering in momentum of a more worrying slowdown which, alongside rising inflationary pressures, raises the risk of stagflation.”
Meanwhile, the eurozone’s manufacturing sector remained buoyant last month. The Markit Eurozone Manufacturing Purchasing Managers’ Index, which records manufacturing activity across all the leading euro area economies, dipped to 57.5 last month, from February’s near-11-year high of 59.