UK private sector output growth surged to its highest point in six months during March, primarily due to services companies that do not anticipate being affected by Donald Trump’s upcoming trade tariffs.
This bump before Rachel Reeves delivers the spring statement on Wednesday provides a positive note for her as services companies report an uptick in order books for the first time this year thanks to robust domestic and international sales.
The S&P UK PMI composite output index, an indicator of private sector activity, jumped to 52.0, its highest since last September, climbing from the 50.5 recorded in February.
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The services sector, which is not impacted by the impending US tariffs on goods, saw an increase to 53.2 in March from February’s 51.0. However, manufacturing activity dipped to 44.6 from 46.9 in February, with 50 being the benchmark for growth versus contraction.
Manufacturers cited “severe headwinds,” including tariffs and escalating global economic uncertainty, noting the lowest confidence levels since November 2022, in stark contrast to the improving sentiment among service providers, which reached a five-month peak.
International demand slumped, leading to the sharpest decline in manufacturing exports since August 2023.
Businesses throughout the manufacturing sector are bracing for further economic slump as global markets prepare for forthcoming trade restrictions.
Since they are reliant on imported components and materials, many manufacturers are apprehensive about being impacted by tariffs as they understand they may also be exporting to countries which could be subject to tariffs, thereby incurring extra costs and potential delays.
Although the White House is contemplating reciprocal tariffs, the prospect of specific sector tariffs has abated somewhat for the April 2nd date initially dubbed as “Liberation Day.”
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S&P Global reported that factory owners are scaling back investment and laying off workers as the manufacturing sector’s outlook diminishes for the year.
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Chris Williamson, the chief business economist at S&P Global Market Intelligence, downplayed the significance of March’s improvement, likening a single positive reading to a premature sign of a broader economic rebound.
Pantheon Macroeconomics’ chief UK economist, Rob Wood, countered that the Q1 PMI readings might be too negative regarding the state of the economy, expecting growth to rebound despite January’s decline.
In the perspective of the year ahead, Wood predicts growth will stay steady but not dramatic, considering the effects of previous interest rate hikes, tighter fiscal policies, and geopolitical uncertainties.
