03 April 2006 | Helen Gilbert

UK manufacturing recorded its slowest growth in new orders in eight months, according to the latest CIPS/RBS purchasing managers' index.

The March PMI - a composite indicator of sector conditions in which an index above 50 means growth - recorded a reading of 50.8, down from 51.5 in February.

Reasons for the drop include slower rates of new orders and supply-side constraints.

Poor demand from domestic and foreign export markets also played a part. New export business showed little movement over the month, with the new export orders index posting a reading of 50.3.

Production schedules were also disrupted by a marked increase in average supplier delivery times. Companies attributed longer lead times to the short supply of new raw materials including metals, chemicals and electronic components.

In addition, UK manufacturers continue to operate in a high cost environment caused by rising gas and electricity prices, and the increased cost of commodities such as metals, chemicals and packaging. The input prices index recorded a level of 64.5, compared with 65.7 in February.

Job cuts, the report said, were one of the ways companies were continuing to offset increases in purchasing costs. It added that staffing levels had reduced as a result of progress in production efficiency, slower growth of output and redundancy programmes.

Despite this, the rate of workforce reduction was only modest, signalled by the employment index recording 48.3, compared with 47.6 in February. Roy Ayliffe, director of professional practice at CIPS, said: "Purchasing managers noted yet another subdued performance by the UK manufacturing, with few signs of improvement in operating conditions. With the exception of investment goods, demand from the domestic and foreign export markets was poor, leading to the least marked growth in new orders in eight months."

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