Service sector strength lifts March PMI to 6-month high
UK private sector output grew at its fastest pace since last September, driven by a strong rebound in the services sector, according to S&P Global’s latest Purchasing Managers’ Index (PMI).
The composite output index rose to 52.0 in March, up from 50.5 in February, marking a six-month high and a solid return to expansion. Services firms, shielded from the impact of looming U.S. tariffs, saw business conditions improve as domestic and overseas sales ticked up.
The services PMI rose sharply to 53.2, compared to 51.0 in February. By contrast, manufacturing slumped to 44.6, down from 46.9 — the lowest reading since 2022.
Manufacturing confidence collapses
Factory owners reported “severe headwinds” from global uncertainty and anticipated U.S. tariffs. Export sales dropped at the fastest pace since August 2023, and production volumes recorded their steepest fall in nearly 18 months.
- Manufacturers cut investment and jobs in response to worsening outlook
- Business optimism in the sector hit its lowest level since November 2022
- Trump’s proposed tariffs on cars and semiconductors threaten further disruption
With April 2 — “Liberation Day” — still set for major tariff announcements, businesses remain on edge. Although a delay in sector-specific levies is possible, reciprocal tariff measures are still expected to be unveiled.
Mixed signals for UK growth
The divergence between services and manufacturing has led to conflicting interpretations of the broader economic picture. Chris Williamson of S&P Global urged caution, saying that “one good PMI doesn’t signal a recovery.”
Still, services firms reported the highest confidence in five months, providing a welcome reprieve to Chancellor Rachel Reeves ahead of the spring statement.
However, the composite data masks deeper structural concerns:
- Input cost inflation persists, especially in goods-producing sectors
- Export-focused manufacturers remain vulnerable to geopolitical shifts
- Rate hikes and fiscal tightening continue to dampen growth prospects
Outlook: Slow and steady growth ahead
Rob Wood of Pantheon Macroeconomics argued that PMI data may be overly pessimistic. He expects a modest pickup in Q1 growth but warned that 2025 will likely bring only “steady, not spectacular” expansion.
