The PMI posted 54.2 in March – slipping to a four month low but staying above the neutral mark of 50.0 for the eight successive month.
Markit said that rates of expansion in output and new orders lost further impetus following recent highs, but they remained above the respective long-run averages.
Meanwhile, the domestic market acted as a key source of new business wins, and export competitiveness was boosted from the weak sterling exchange rate.
The outlook for the sector also remained positive, Markit said. Business optimism rose to a 10-month high and almost 52% of companies forecast increased production in 12 months’ time compared to only 6% anticipating a decrease.
Other findings show headcounts rose for the eighth month running, with employment increasing at both SMEs and larger-scale producers; input costs increased; and output charge inflation ticked higher.
Rob Dobson, senior economist at IHS Markit, said: “The survey data suggest that the goods-producing sector made a solid contribution to GDP during the opening quarter of 2017. However, it’s clear that the expansion will be less than the buoyant 1.3% rise seen in the fourth quarter of last year.
“With growth losing further momentum in March, that weaker trend is likely to continue into the second quarter.”
Dave Atkinson, UK head of manufacturing at Lloyds Bank Commercial Banking, said: “Article 50 was triggered last week, and will resurface some uncertainty as manufacturers think about both the long and short-term impact of leaving the European Union.
“But, despite the slight drop in confidence, firms continue to perform well.
“Although another successive month of slowing growth is disappointing, the underlying trend remains strong. Both home and overseas markets are contributing to growth and we hope to see firms’ confidence remain above the long-term average in the months ahead.”
Lee Hopley, chief economist at EEF, said: “Today’s data shows a solid quarter of expansion for manufacturing with production levels and new orders held firm, supported by strengthening activity in key markets, particularly Europe.
“That said, the indicator may well provide a snapshot of what we can expect in the wider economy over the coming year, with a slight deceleration in activity driven mainly by consumer spending tempered by rising prices and squeezed real incomes.
“Today’s data certainly doesn’t set off any alarm bells but it does signal that the consumer, one of the big props of UK growth in recent years, is already under the cosh and if there is any loss of momentum in the global economy, these strong manufacturing indicators could falter.”
