UK manufacturing unexpectedly expanded in the final data for March. The 49.9 flash sector PMI was revised up 0.4 points and at 50.3, stands above the 50-growth threshold for the first time since July 2022. The latest reading was a 20-month high.

Output and new orders both posted gains, the former for the first time since February 2023. Moreover, what was only a modest increase in new orders was driven by the domestic market as exports declined for a 26th successive month. Employment and purchasing activity continued to fall but at significantly slower rates than in February. Indeed, job losses were the smallest since last May. Looking ahead, business optimism climbed to its highest level since April 2023 with some 58 percent of firms expecting output to be higher in a year's time.

However, upward pressure remained on both input costs and factory gate prices, the inflation rate of former hitting a 1-year high and selling prices being lifted for a fifth consecutive month.

Taken at face value, the revised March data are cautiously optimistic. Downside risks clearly remain but the return of the manufacturing sector to positive growth can only be good news for real GDP and, unless inflation slows more rapidly than expected, provides further reason for expecting the BoE to be wary about cutting Bank Rate prematurely. Today's update boosts the UK RPI to 14 and RPI-P to 25. Both readings show recent economic activity in general expanding rather more quickly than expected.

No revisions are expected leaving the headline index at 49.9, up from February's final 47.5.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The survey covers more than 600 industrial companies and is compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. and the and S&P Global PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.