Manufacturing�activity shrank for a second consecutive month in March

Manufacturing shrinks for second month

UK Manufacturing activity shrank for a second consecutive month in March, a survey showed today.

The Markit/CIPS manufacturing purchasing managers' index came in at 48.3, only slightly above February's surprisingly poor reading of 47.9, and a touch weaker than the consensus forecast.

The output component of the survey fell in March at its fastest pace since October, but there was better news from the country's largest business survey which showed that export orders with British firms rose strongly in the first three months of 2013 and confidence about the next 12 months picked up.

The Markit PMI survey suggests that manufacturing exerted an even bigger drag on growth between January and March than it did in the fourth quarter of 2012, when it accounted for a third of the economy's 0.3 per cent contraction.

"The onus is now on the far larger service sector to prevent the UK from slipping into a triple-dip recession," said Rob Dobson, senior economist at Markit.

Official GDP data for the first quarter won't be released until April 25 but the evidence so far suggests a strong risk that Britain will record a second consecutive quarter of contraction – a the technical definition of recession.

The Markit report blamed the poor performance of manufacturing, which accounts for around a fifth of British economic output, on tough market conditions, subdued client confidence and ongoing bad weather.

New orders from abroad contracted for the 15th month running in March with the survey blaming the fall on weak demand from Europe and strong competition in US and South Asian markets.

In further bad news for UK policymakers, there were also signs that inflation pressures were picking up as output prices rose at the fastest pace in three months while input prices picked up sharply, driven by the weakness of sterling and higher energy and food costs.

A new survey published today by EEF, the manufacturers’ organisation, showed firms are concerned that the UK’s stretched infrastructure is effecting their competitiveness and hitting export targets.

The survey comes ahead of the publication of the government’s transport strategy and Spending Review in the summer and the EEF has called for the government to increase the priority it places in investment in roads, act faster on issues like airport capacity and take politics out of infrastructure decisions by setting up an independent commission.

Roger Salomone, EEF head of Business Environment Policy, said: “Political prevarication and policy reversals have left Britain in the slow lane in developing its infrastructure for decades. The forthcoming transport strategy is an opportunity to address this.

“Government must reassess its investment priorities, act faster on major issues like airport capacity and take the politics out of infrastructure by setting up an independent commission. In particular, the road network is the backbone of the economy but, it has been neglected.

“We are now feeling the ill effects, with the majority of firms reporting that the state of the nation’s roads is significantly increasing their operating costs. Investment should be targeted at shovel-ready maintenance projects and bringing forward upgrades to heavily congested arteries.

“Furthermore world-class air links are critical to export-led growth and attracting inward investment. To keep up with the competition we need investment across the board, in Heathrow and in regional airports. Maintaining our status as a global aviation hub is critical to our international standing and expanding runway capacity at Heathrow is the most viable way to secure this.”

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