A faster increase in incoming new work and sustained growth of employment numbers were the main positive developments recorded by the survey during March. Latest data also pointed to stabilization in new export orders, following a slight fall in February. Manufacturers noted that generally improving global economic conditions had helped to offset some of the negative influence on export sales from the strong dollar.
Despite a slightly sharper rise in new work, manufacturing output growth was unchanged from the 28-month low recorded during February. Moreover, output growth remained below its postcrisis trend and close to its lowest since late-2012. A relatively weak rise in production volumes was linked to subdued client spending patterns so far this year and a corresponding lack of pressuring on operating capacity. Reflecting this, backlogs of work were reported to have fallen again in March, which extended the current period of decline to four out of the past five months.
Manufacturing companies indicated cautious inventory policies in March. Post-production stocks were broadly unchanged, as has been the case throughout 2016 to date. Stocks of inputs were reduced for the fourth month running and the rate of decline was the fastest since January 2014. Survey respondents linked this fall to relatively subdued output growth and heightened uncertainty about the business outlook. At the same time, growth of input buying was only marginal, following a reduction in February.
The latest survey highlighted a sustained decrease in average cost burdens across the manufacturing sector. Lower input prices have now been recorded for seven months running, although the latest decline was only marginal. Where a drop in input costs was reported, manufacturers mainly cited the impact of lower commodity prices.
Manufacturers reported a further reduction in their factory gate charges during March, but the rate of decline moderated since February. Survey respondents attributed the latest fall to competitive pricing strategies and lower input costs.