Input costs for UK manufacturers at five-and-a-half-year low

Will Green is news editor of Supply Management
2 February 2015

Input prices for UK manufacturers have fallen to their lowest level for five-and-a-half years, according to a survey.

Low oil prices contributed to the drop, which also fed through to lower selling prices in January, the Markit/CIPS UK Manufacturing Purchasing Managers' Index found.

Some 31 per cent of firms reported a fall in input costs, with the oil price drop linked to lower prices for energy, transportation and oil by-products.

But the rate of decline in output charges was only mild and substantially less marked than that signalled for input costs.

David Noble, group CEO, CIPS, said: “The biggest trend for procurement and supply management professionals is the positives from the drop in oil prices and the effects on general purchasing prices, which showed the biggest fall since May 2009 and which also had an effect on transportation costs and oil derivative products.”

The index - where a reading of 50 indicates no change - recorded 53 in January, slightly higher than December’s revised reading of 52.7, with the domestic market the prime driver of new orders.

The survey found solid output growth in both intermediate and investment goods but the rate of growth in consumer goods output ground to a near standstill. There was a modest increase in new business from overseas, with rising demand from France, Germany, Japan, the Middle East, Poland and the US.

Staffing levels rose for the 21st successive month, though the rate of increase fell to a three-month low, which aided efforts to clear backlogs of work.

Rob Dobson, senior economist at Markit, said: “The domestic market remains the main growth driver, as the UK economic recovery provides a steady stream of new business. There were also signs of improvement in overseas markets, with new export orders posting the first meaningful gain for five months, but it still looks as if lacklustre demand from the eurozone in particular remained a headwind for British manufacturers.

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