UK factory activity edges up from March’s one-year low – PMI

The City of London financial district can be seen as people walk along the south side of the River Thames, amid the coronavirus disease (COVID-19) outbreak in London, Britain, March 19, 2021. REUTERS/Henry Nicholls

LONDON, May 3 (Reuters) – British factory activity edged up in April after slowing to its weakest in just over a year in March following Russia’s invasion of Ukraine, but manufacturers were wary about the outlook as costs leapt and demand faltered, a survey showed on Tuesday.

The S&P Global/CIPS manufacturing Purchasing Managers’ Index (PMI) rose to 55.8 in April from March’s 13-month low of 55.2, a slightly bigger rise than the increase to 55.3 in an earlier ‘flash’ estimate.

Some 55% of manufacturers expected output to rise over the coming year, but this reflected the weakest outlook since December 2020 as domestic orders grew by the least since January 2021 and export orders fell by the most since July 2020.

“Lacklustre demand from the EU was linked to longer delivery times, customs checks and higher shipping costs post-Brexit,” S&P Global said.

Higher prices also played a role in reducing demand both at home and abroad, businesses said.

More than 60% of manufacturers raised prices in April – giving a record inflation balance – after the cost of inputs such as energy and raw materials jumped by the second-biggest amount on record.

The Bank of England is closely eyeing surging prices that have already pushed consumer price inflation to its highest in 30 years, and most economists expect it to raise interest rates to 1% on Thursday, the highest since 2009.

The BoE is concerned that businesses passing on higher costs could make inflation slow to fall, even after energy prices stabilise. It is also predicting growth will slow sharply this year as inflation eats into Britons’ spending power.

“Several companies simply noted that ‘everything’ cost more,” S&P Global said.

Reporting by David Milliken; Editing by Toby Chopra

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