London, United Kingdom. British business activity grew at its slowest pace in six months in March, while manufacturers’ input costs accelerated at the fastest rate since 1992, according to an S&P Global survey. The data highlighted risks to the government’s economic agenda stemming from the Iran conflict.
Composite PMI falls to 51.0
S&P Global said its preliminary composite Purchasing Managers’ Index, covering manufacturers and non-retail services businesses, fell to 51.0 in March from 53.7 in February, which had been the joint-highest reading since August 2024. The index remained above the 50 level that separates growth from contraction.
S&P Global said the PMI was the first major survey to show the impact on British businesses from the US-Israeli war on Iran, which is expected to slow already weak growth and push up inflation.
Input prices post largest monthly rise since 1992
S&P Global’s measure of input prices for British manufacturers rose to 70.2 in March from 56.0 in February, marking the biggest month-to-month increase since sterling exited Europe’s Exchange Rate Mechanism in 1992.
S&P Global cited higher prices for fuel, transport and energy-intensive raw materials as the main drivers of the rise.
Economist comments and market expectations
Paul Dales, chief UK economist at Capital Economics, said: “March’s flash PMIs show that the conflict in the Middle East is already going a long way to boosting inflation and extinguishing GDP growth. And this is just the start.”
Dales added: “It’s no surprise that the surge in energy prices triggered by the Middle East conflict has weakened activity and raised prices – that’s textbook. But we are a bit struck by how rapid the moves have been.”
The survey’s headline reading was below all forecasts in a Reuters poll of economists, though it was above the 50 level.
S&P Global’s reading was also higher than in parts of the period leading up to finance minister Rachel Reeves’ budget in November, when many businesses feared higher taxes.
Euro zone PMI declines less sharply
The equivalent PMI for the euro zone fell to 50.5 in March from 51.0 in February, a smaller decline than in the United Kingdom.
How do you think higher energy and transport costs will affect your business or household budget in the coming months?