Rising supply chain constraints lead to slower production growth and rising input prices in August
UK manufacturers continued to face rising constraints caused by supply chain issues during August. Shortages of inputs and delivery delays disrupted production schedules, leading to slower output growth, and also resulted in marked increases in input prices. Companies nonetheless still achieved solid gains in output, new orders and employment.
The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) fell to a five-month low of 60.3, a tick below July’s 60.4 but above the long-run average of 51.9. The PMI has signalled an improvement in operating performance in each of the past 15 months.
Manufacturing output rose again in August, albeit to the weakest extent since February. Growth eased particularly sharply at intermediate goods producers. Companies linked higher output to new order gains and the ongoing process of re-opening global economies.
Incoming new business rose in August, reflecting increased inflows from both domestic and overseas markets. On the export front, manufacturers reported increased orders from clients in Europe, China, the US, Asia and South America.
The outlook for the UK manufacturing sector also remained bright in August. Almost 66% of companies indicated that they expect output to rise over the coming year, compared to only 4% forecasting a decline. Confidence rose to a three-month high, reflecting expectations of continued economic revival, stronger global demand, investment plans and hopes that current supply issues would either lessen or even UK Manufacturing PMI at 60.3 in August Output growth slowdown exacerbated by input supply issues Input cost and selling price inflation remain close to survey records Data were collected 12-25 August 2021. be fully resolved.
Robust confidence among manufacturers supported further job creation during August. Employment rose for the eighth month in a row and to one of the greatest extents in the survey history (albeit also the slowest since April). Staffing levels were raised to increase capacity, meet rising demand requirements and start addressing backlogs of incomplete work. However, there were also reports from some manufacturers of both labour and skills shortages.
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