British manufacturing sector expanded at the fastest pace in eight months during March as orders and production growth gathered momentum.
The Purchasing Managers’ Index rose to 54.4 from 54 in February, which was revised down from 54.1, survey results from Markit Economics and the Chartered Institute of Procurement & Supply showed Wednesday.
The latest PMI reading was in line with economists’ expectations. The index reading above 50 indicates growth in manufacturing and the British factory sector expanded for the 24th consecutive month.
The average reading for the first three months of 2015, at 53.8, was the best growth outcome since the second quarter of last year, the survey said.
Production expanded at the fastest pace in nine months, underpinned by the steepest gain in incoming new business since July 2014.
The strong domestic market remained the principal source of new contracts. Exporters also see a modest rise in overseas demand.
Among the different industrial groups, consumer goods remained the strongest performer. Production of consumer goods rose at the fastest pace since last April. Intermediate and investment goods producers also fared well in March.
Employment in manufacturing improved for the twenty-third straight month in March with job creation recorded at both small and medium sized enterprises and large-scale producers. Companies linked higher workforce numbers to the clearing of backlogs.
On the inflation front, selling prices and input costs both fell further. The rate of deflation in input costs edged closer to January’s near six-year record. Subsequently, output charges were also lowered.
“The sector is on course for output growth ranging around 0.6 percent over the opening quarter as a whole, a positive contribution to broader economic expansion and its best performance since the first half of last year,” Rob Dobson, a senior economist at Capital Economics, said.
Official data showed that industrial production fell 0.1 percent and manufacturing output declined 0.5 percent in January.
The continued improvement in the surveys provide some reassurance that the dip in the official output data at the start of the year will prove temporary, Vicky Redwood, chief UK economist at Capital Economics, said.
A report released by the Office for National Statistics showed that labor productivity declined in the fourth quarter, while labor costs rose moderately.
Labor productivity as measured by output per hour dropped 0.2 percent in the fourth quarter from the prior three months, when it grew 0.5 percent.
In 2014 as a whole, labor productivity was little changed from 2013. Despite weak productivity growth, unit labor costs increased moderately.
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