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Manufacturing growth cooled during March

GROWTH in UK manufacturing activity eased in March for a fourth consecutive month, to its slowest pace since last summer, a survey has revealed.

The survey, published yesterday by the Chartered Institute of Purchasing and Supply, was significantly weaker than economists had expected.

CIPS's purchasing managers' index (PMI) for manufacturing, a composite measure of activity including output, new orders, employment, suppliers' delivery times and stocks of goods purchased, fell from a downwardly-revised 56.2 in February to 55.3 in March on a seasonally-adjusted basis.

The City had predicted a March reading of 56.7. The actual figure of 55.3, while remaining well above the level of 50 deemed by CIPS to separate expansion from contraction, signalled the slowest pace of increase in this composite measure of manufacturing activity since July last year.

CIPS's manufacturing output index fell from 58 in February to 57.7 in March. The pace of increase of new export orders eased significantly in March, the survey showed. Growth in overall new orders also slowed sharply, but was nevertheless robust by historical standards.

Paul Hollingsworth, assistant economist at consultancy Capital Economics, said: "Although March's CIPS manufacturing report indicated that the sector's recovery may have lost some steam over the first quarter, this seems unlikely to herald the beginning of a renewed slowdown."

However, he added: "Admittedly, the fall in the headline PMI took it to the lowest level since July last year. Meanwhile, the sharp fall in the export orders balance... suggests that UK exporters may finally be feeling the effects of the strong pound."

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "The March purchasing managers' survey is slightly disappointing in that it shows overall manufacturing expansion moderating to an eight-month low but it nevertheless still points to decent growth in the sector."

He added: "Slightly worryingly, the survey indicated that March's slowdown in manufacturing output and new orders was mainly centred on the investment goods sector, which is not good news for hopes that business investment can see sustained robust improvement over the coming months and help the economy become more balanced."

The survey continued to point to a solid rate of expansion of the UK manufacturing workforce.

Rob Dobson, senior economist at survey compiler Markit, said: "The latest manufacturing PMI is likely to disappoint the markets, coming in more than a full index point below expectations, but it's important to remember this is in the context of the super-strong, near-record growth rates seen in the second half of last year.

"Growth is merely hot rather than scorching, and the take-home messages from the March survey are that the recovery remains solid and continues to drive strong job creation."

Chancellor George Osborne had, in his March 2011 Budget, spelled out his vision of "a Britain carried aloft by the march of the makers".

But manufacturing output in January, the latest month for which figures from the Office for National Statistics are available, was lower than in March 2011.

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