Price pressures intensify for UK manufacturing

Will Green is news editor of Supply Management
1 February 2018

Growth in the UK manufacturing sector slowed in January against a backdrop of rising price pressures.

Input prices rose at the fastest rate in 11 months and companies reported higher costs for chemicals, food products, metals, oil, paper and plastics.

In turn, costs were passed onto clients with the steepest increase in output charges since April last year.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index eased to 55.3 in January, down on 56.2 in December and against the no-change reading of 50.

Duncan Brock, director of customer relationships at CIPS, said: “Purchasers reported that global demand impacted on their costs, with another sharp inflationary rise.

“Respondents mentioned forward buying as a way of controlling prices and securing supply to remain competitive, but firms also attempted to claw back some of their margins by raising their own prices to clients at a level not seen for nine months.”

Data signaled solid increases in output and new orders across consumer, intermediate and investment goods sectors, though growth in new orders was the slowest for seven months. There were reports of increased sales to clients in North America, China, mainland Europe, the Middle East and Japan.

Rob Dobson, director at IHS Markit, said: “The UK manufacturing sector reported an unwelcome combination of slower growth and rising prices at the start of 2018.

“Encouragingly, despite the slowdown, the latest survey is consistent with production rising at a solid quarterly rate of around 0.6% in January, with jobs also being added at a faster pace. However, output growth has slowed sharply since last November’s high, and the more forward-looking new orders index has slipped to a seven-month low.

“The trend in demand will need to strengthen in the near-term to prevent further growth momentum being lost in the coming months.”

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