Data released by S&P Global/CIPS showed that activity growth in the UK private sector accelerated in March, reaching a 5-month high. However, a marked decline in manufacturing production weighed on overall private sector output growth. Total new work decreased for the fourth consecutive month amid a steep and accelerated downturn in the manufacturing sector. Strong cost pressures led to another month of falling private sector employment.
The UK composite PMI rose to 51.5 points from 50.5 points in February. Economists had expected an increase to 52.0. The services PMI rose to 52.5 points from 51.0 points in March. Consensus estimates suggested growth to 53.2 points. Both indices remain above the 50-point mark, which indicates an expansion of activity in the sector, for the 17th month in a row.
The report showed that business activity in the service sector increased due to improving order books, with new work growth reaching its highest pace since November. While business and consumer spending showed pockets of growth, challenges persisted, including tight household budgets, rising client risk aversion, and geopolitical uncertainty. For the first time in four months, foreign demand grew, driven by market expansion overseas and a slight rebound in European demand, though US sales remained weak. Despite new business growth, service providers managed workloads efficiently, leading to a modest decline in backlogs. Hiring slowed in March, influenced by rising National Insurance costs and higher wages. Payroll numbers continued to decline, but the job-cutting rate eased compared to February. Business confidence improved slightly, with 43% of firms expecting growth, though optimism remained below historical trends. Key concerns included payroll costs, weak domestic conditions, and US tariffs. However, input price inflation hit a three-month low, aided by lower transportation costs, resulting in the slowest rise in service prices since December 2024.