Manufacturers must not “rest on their laurels” after continued cost pressures and weaker growth forced the industry into a fresh low, a report has warned.

Latest figures show the sector stumbled in March as slower consumer goods production compounded higher overheads caused by sterling’s Brexit-induced slump and rising commodity prices.

However, manufacturers did benefit from the pound’s weakness, with new orders from abroad complementing a steady stream of domestic contracts.

The update was revealed yesterday in a Markit/CIPS manufacturing purchasing managers’ index report, which said while employment numbers had risen for the eighth consecutive month and the sector was “solid” at the end of the first quarter, some caution was needed.

According to the survey, the industry gave a reading of 54.2 in March, which although ahead of the 50 mark used to separate growth from contraction, represented a four-month low and was down on the 54.5 recorded in February.

Economists had expected a figure of 55.

Duncan Brock, director of customer relationships at the Chartered Institute of Procurement and Supply, warned businesses, many of whom have discovered newfound belief since the Brexit vote, could be tainted.

He said: “Between the EU referendum and triggering of Article 50, manufacturers have completed a remarkable return to confidence.

“Factories have revved up production, hiring (has grown) and the beginning of formal negotiations with the EU has failed to dampen the sense of optimism.

“But despite the confident mood, the depreciation in sterling, which has supported exporters, has come at a price.

“With the rate of new order growth showing early signs of easing, manufacturers must act to ensure they are not locked into costly contracts.

“Now is the not the time to rest on laurels.”

Rob Dobson, senior economist at HIS Markit, which compiles the survey, reiterated manufacturing output had slipped to its weakest pace of growth in eight months during March, which he said took some of the gloss off companies’ performance and could seep into the year ahead.

He added: “With growth losing further momentum, that weaker trend is likely to continue into the second quarter.

“High costs and weak wage growth are sapping the strength of consumers, with rates of expansion in output and new orders for these products slowing further.

“The impact of the exchange rate is still being keenly felt on the cost side and although purchase price inflation moved further from January’s record high, it remained among the steepest recorded in the 25-year survey history.

“The pass-through of these costs means selling price inflation remains stubbornly high.”

*** Source – The Northern Echo. ***