UK's private sector activity moderately increases in Mar 2023: Report

Manufacturers continued to report improving supply conditions with delivery times shortening to the greatest extent since April 2009. Input price inflation meanwhile fell to a two-year low in March, mostly reflecting a considerable softening of cost pressures in the manufacturing sector. Many firms noted that lower commodity prices and falling freight rates had been passed on by suppliers, S&P Global said in a press release.

UK private sector firms reported a solid rise in new business volumes during March. Higher levels of new work have been recorded in each of the past two months and the latest upturn was the fastest since April 2022.

Survey respondents typically linked rising new business volumes to improved client confidence, resilient demand for consumer services, and a boost to spending from falling inflationary pressures. Goods producers indicated that new orders increased only fractionally. Meanwhile, export sales fell for the fourteenth successive month in March.

Employment numbers were broadly unchanged across the private sector as a whole. Some firms commented on a headwind to recruitment from shortages of available candidates, although others noted hiring freezes due to strong cost pressures.

Average cost burdens increased sharply during the latest survey period, but the overall rate of inflation moderated for the fourth month in a row to its lowest since March 2021. Service providers continued to signal a much steeper rise in input prices than manufacturing companies, with the latter recording the slowest increase since June 2020. Strong wage pressures were widely cited by survey respondents in March. This was partly offset by lower fuel bills and reduced transportation costs.

Meanwhile, prices charged inflation continued to drift downwards in March as softer cost pressures were gradually passed on to customers. The latest rise in average selling prices was the slowest since August 2021. However, many businesses suggested that squeezed margins, ongoing wage inflation, and uncertainty about energy costs had limited their ability to discount prices.

Looking ahead, private sector firms are optimistic about their business activity prospects during the next 12 months. The degree of confidence edged up since February and was the highest since March 2022. This largely reflected a rise in business expectations across the manufacturing sector, which was driven by hopes of a rebound in customer demand and a boost from improving supply chain performance.

Commenting on the flash PMI data, Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “With the flash PMI surveys signalling a second month of rising output in March, the UK economy looks to have returned to growth in the first quarter. The surveys are broadly consistent with GDP growing at only a modest quarterly rate of 0.2 per cent, but this represents a welcome expansion compared to the lack of growth seen in the second half of last year.”

“The manufacturing sector’s undoing remained falling pipelines of new work. In spite of supply chain strength returning, less work resulted in job shedding and lower purchasing volumes as the sector failed to gain momentum and fell into contraction again,” said Dr John Glen, CIPS chief economist.

Fibre2Fashion News Desk (NB)