The UK manufacturing sector remained under strain in April, as persistent economic uncertainty and surging input costs weighed heavily on business activity. Although the Manufacturing PMI edged up marginally to 45.4 from 44.9 in March, it still signalled contraction for the seventh consecutive month.

Manufacturers continued to experience falling output, new orders, and employment, with export demand dropping at its fastest rate in nearly five years. Confidence among both consumers and businesses remained low, exacerbated by concerns over global trade, including potential US tariffs. Notably, investment goods producers saw a marked decline in orders, reflecting deepened hesitation around capital spending.

Rising costsincluding higher energy bills, staff-related expenses, and global supply chain disruptionsdrove input cost inflation to a 28-month high, prompting firms to implement price increases. In response, businesses cut staff, froze hiring, reduced inventories, and scaled back purchases to manage margins. Supply chains continued to suffer, with vendor delays extending for a sixteenth month. Business optimism slumped to its lowest point in over two years, underscoring a fragile manufacturing outlook clouded by global volatility and domestic cost burdens.

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.