Price inflation hits 28-month high as manufacturing expansion continues

Will Green is news editor of Supply Management
2 January 2014

Price inflation for factory goods hit a 28-month high in December as rates of expansion in manufacturing production and new orders maintained strong growth.

The Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) eased to 57.3 in December, slightly down on November’s 33-month high of 58.1, but still indicative of a “robust improvement in overall operating conditions”.

Average input costs and output charges rose at faster rates in December, pushed up by the increased cost of commodities, energy, meat, paper, packaging, polymers and timber. There were also reports that suppliers were raising their prices in response to increased raw material demand and shortages of certain inputs.

At the same time average vendor lead times lengthened for the seventh month in a row.

The average PMI reading for the final quarter of 2013 as a whole was 57.2, the highest since quarter one of 2011, and manufacturing output rose for the ninth consecutive month in December.

Levels of new export business also increased in each of the nine months to December, with manufacturers reporting improved demand from Brazil, China, Ireland, Russia and the USA.

December also signalled an eighth successive monthly increase in manufacturing employment, with the rate of jobs growth the second strongest in two-and-a-half years.

Rob Dobson, senior economist at Markit, said: “With the manufacturing sector still some 9 per cent off its pre-crisis peak production, the question everyone wants answering is whether this upturn can develop into a self-sustaining recovery. The news is still good on this score, as growth is coming from a broad base that should help keep the rebound on track during the early stages of 2014.”

CIPS group CEO David Noble said: “The only area of concern is the cost inflationary pressure which continued to build up during this final month, with input price inflation hitting a 28-month high.”

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