What does today's PMI say about manufacturing?

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The manufacturing PMI for March was released earlier today. Although down from last month's record high, the figure stood at an impressive 57.1, some way above the long-term average of 51.3. The PMI now shows expansion in the manufacturing sector for 20 consecutive months.

The figure suggests growth has slowed a little in the manufacturing sector, though this is to be expected as the rebound-effect on the figures starts to ease off. But manufacturing is still growing strongly. Markit, who compile the survey, comment that over 2011q1 as a whole, output growth was the fastest since 1994q3.
A closer look at the PMI does suggest that there are some areas of concern for manufacturers, though.
The first of these is input price pressure, following 19 consecutive months of input prices growth in March manufacturers put up their output prices at a record high rate. Input price pressure is likely to continue, driven by strong growth in emerging markets, but unrest in the Middle East, and problems with the supply of components following the earthquake in Japan will exacerbate this, at least in the short term.
As well as rising prices, some manufacturers will be affected by subdued consumer confidence. A recent survey conducted by GfK-NOP showed that has remained at a level generally associated with recession. ONS data also showed that retail sales fell back in February. As a result, the PMI shows that orders growth slowed more for manufacturers of consumer goods, than for producers of intermediate and investment goods.


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