(Alliance News) - Parts of the UK's latest manufacturing PMI data "make grim reading", but overall the report contributed to a "remarkably" positive picture of the economy, according to analysts.
The S&P Global manufacturing purchasing managers' index improved to a 47-month high of 53.7 points in April from 51.0 points in March, beating the flash reading of 53.6 points that was released in late April.
Climbing further above the neutral 50-point mark separating growth from contraction, this indicates that UK manufacturing growth accelerated in April. New export businesses, meanwhile, rose for the fourth consecutive month, but at a weaker level than in March. Intakes of new work improved from clients in the US, China, Japan, and India, S&P Global noted.
However, business optimism fell to its lowest level in a year during April amid concerns about the impact of the war between the US, Israel, and Iran.
S&P Global highlighted: "Supply chain pressures continued to build in April. Average vendor performance deteriorated to the greatest extent in almost four years, linked to ongoing complications caused by the Middle East war and restrictions on transit through the Strait of Hormuz. Shortages of freight capacity, port disruptions and customs delays were also mentioned by manufacturers."
More positively, S&P Global said: "Companies still expect new product launches, planned marketing activity, improved client confidence and hopes for a more stable geopolitical backdrop to support output growth over the coming year."
Rob Dobson, director at S&P Global Market Intelligence, said: "April saw the growth rate of the UK manufacturing sector recover after being hit by the impacts of the war in the Middle East during March. The headline PMI rose to a near four-year high, as the trends in output and new orders strengthened. Staffing levels were also increased for the first time in 18 months."
However, he cautioned that "the upturn comes with several catches...Restrictions on transit through the Strait of Hormuz are causing substantial disruptions to input deliveries, with supplier lead times lengthening to the greatest extent in almost four years.
"The resulting material shortages are exerting steep pressure on purchasing costs. Input prices rose at one of the fastest rates in the 34-year survey history, and at a pace rarely exceeded outside of the pandemic-related inflationary surge of 2021-22."
Dobson added: "It should also be noted that the gain in production is partly the result of clients bringing forward purchases to mitigate expected price uplifts and supply disruptions. As this process unwinds later in the year, alongside declining business optimism, growth in the sector could cool while inflationary pressures remain on high heat."
The PMI survey draws upon a panel of 650 companies in the UK manufacturing sector, with responses collected between April 9 and 27.
Pantheon Macroeconomics' Chief UK Economist Rob Wood noted: "The manufacturing PMI was remarkably revised up from the flash release, so sentiment improved between the end of the flash survey period on April 21 and the final survey end date of April 27 despite Brent oil prices surging to nearly USD110 during that period."
He continued: "We expect the manufacturing PMI to fall back in May as front-running supply constraints - weaker output expectations from firms is consistent with our call - but the risks now skew up to our growth call of 0.0% in Q2...The PMI matches a slew of other growth indicators showing the economy holding up surprisingly well after the Iran War.
"Granted, some of the demand strength reflects firms trying to get ahead of potential supply disruptions and households front-running increasingly likely rate hikes. But underlying growth looks ok too...The jobs balance hit 50.9, the strongest since August 2024 and hardly consistent with firms planning for only temporary output gains."
Wood acknowledged that the price rises "make grim reading", but said that "we place relatively little weight on them," as service sector data, due next week, "will matter more".
The UK services PMI for April will be published by S&P Global on Wednesday, May 6.
According to the flash data published last week, the services PMI business activity index ticked up to 52.0 points from 50.5 in March, ahead of the 50-point consensus, while the composite output PMI rose to 52.0 from 50.3, ahead of FXStreet-cited market consensus for 49.8 points.
However, Chris Williamson, chief business economist at S&P Global, warned that "the upturn comes with a catch," in part reflecting "a short-term boost from a rush to secure purchases ahead of feared price rises and supply shortages linked to the war."
By Emma Curzon, Alliance News reporter
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