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“March’s flash data show the first impacts of the
war in the Middle East on growth, demand, business
confidence and, perhaps most notably, prices.
“The service sector has seen an immediate negative
impact. Growth in business activity has slowed sharply
to its weakest since the current upturn began last
September, weighed down by a drop in inflows of
new work that reflects a combination of increased
uncertainty and rising price pressures.
“The big surprise is perhaps the acceleration in
growth in the manufacturing sector. Reports from
goods producers indicate that demand has in some
cases been boosted by companies reacting to the
disruption and uncertainty brought on by the war in
the Middle East, with some bringing forward purchases
over concerns about potential supply disruption in
the coming months.
Output expectations have been
revised down, which is a sign that the surge in factory
activity will likely be short-lived. Supply-chain pressures
have already started building, with average lead
times on inputs lengthening to the greatest extent for
over three-and-a-half years in March. Moreover, the
manufacturing sector is at the sharp end of the surge in
inflationary pressures, seeing input costs increase at a
rate not seen since late-2022.”





