Supply chain disruptions hit factories

Will Green is news editor of Supply Management
1 March 2018

Growth in the UK manufacturing sector eased to an eight-month low in February with supply chain disruptions being blamed for the slowdown.

The IHS Markit/CIPS UK Manufacturing Purchasing Manager's Index slipped to 55.2 in February, down slightly on 55.3 on January and against the no-change position of 50.

Manufacturing production increased at the slowest pace for 11 months, across the consumer, intermediate and investment goods sectors, and input buying slowed to an eight-month low.

Firms indicated rising demand for inputs was causing shortages to develop, with a further lengthening of average vendor lead times and higher prices charged by suppliers. Higher costs were reported for a broad range of commodities and raw materials.

Part of the increase in purchasing costs was passed on to clients in the form of higher charges but rates of inflation for both inputs and outputs were slower than in January.

Duncan Brock, director of customer relationships at CIPS, said: “Amidst these signs of a moderate slowdown, it was supply chain disruptions that were largely at fault.

“Suppliers underperformed not only on the timely delivery of goods but in their inability to meet the demand from makers for some raw materials. This intensified capacity issues and acted as a drag on overall purchasing activity.”

However, the rate of new orders picked up and companies indicated domestic demand strengthened while new export business rose at a solid, though slower, pace. Export increases were linked to sales in the US, China, Europe, Brazil and East Asia.

Firms remained positive about the business outlook, with almost 56% predicting output would be higher in 12 months' time, compared to only 6% expecting a decline.

Rob Dobson, director at IHS Markit, said: “Supply chain delays are also reining in production growth. Any easing in these constraints would not only provide a further boost to growth, but also ease some of the pressure on input costs.

“Price inflation currently remains stubbornly high, as suppliers pass on higher commodity and raw material costs in part caused by demand outpacing supply. If this feeds into rising consumer prices, household spending could take a further knock in coming months.”

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