UK manufacturing sees stronger growth of output and employment at start of 2022
Production rises at fastest rate in six months
New order growth slows despite mild uptick in new export business
Input cost and output price inflation ease Data were collected 12-26 January 2022.
The start of 2022 saw growth of UK manufacturing output and employment strengthen, as companies responded to improved new order intakes, rising backlogs of work and addressed shortfalls in capacity. Although supply chain constraints continued to stymie growth, there were signs that these were passed their peak, a factor contributing to a slight easing in purchase price inflation.
The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) fell slightly to 57.3 in January, down from 57.9 in December, remaining above the 50.0 no change mark for the twentieth consecutive month. The marginal dip in the index level reflected slower growth of new orders and a further easing in the rate of increase in vendor lead times.
Production volumes rose for the twentieth successive month in January. The rate of expansion accelerated for the third month running to its highest since July 2021. Increased output reflected rising new order intakes, efforts to tackle backlogs of work and a slight improvement in export demand. Some firms also noted that supply chain stresses, staff shortages and slower growth of new work had stymied efforts to raise production further.
Stronger output growth had a positive impact on the trend in job creation during January. Manufacturing employment increased for the thirteenth consecutive month, with the rate of expansion the second-steepest in 11 years. Companies linked recruitment activity to new project launches, greater demand for products, preparations for future growth and efforts to address capacity shortfalls and rising backlogs.
News of improved growth of output and employment was partly tempered by an easing in the rate of increase in new business. Although the domestic market remained the prime source of new contract wins, the latest survey suggested that growth was less pronounced than in the prior month. New export business meanwhile rose, albeit only slightly, for the first time in five months, amid reports of stronger demand from the EU, the US, China, Brazil and the MENA region.
Although input price inflation remained substantial compared to the historical standards of the survey, the rate of increase eased to a nine-month low. Companies continued to report a wide array of inputs as up in price, including chemicals, electronics, energy, foods stuffs, metals, packaging and timber. Higher costs were passed on to clients in the form of increased output charges.
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