Resource shortages lead to ‘near-record’ price hikes

2 August 2021

 

Shortfalls in employment and commodities have dampened UK manufacturing’s recent growth, as output and new work orders hit four-month lows, according to the latest PMI.
A triple impact from a lack of available staff, HGV drivers and raw materials remained “a prime concern” for businesses in July, and while the sector remains healthy, supply chains are stretched. 
The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index report found 72% of manufacturers have encountered cost rises, and input expenses rose at a near survey-record pace. 
Items including chemicals, commodities, electronics, food stuffs and packaging have all been subject to reduced availability and long lead times. 
Rob Dobson, director at IHS Markit, said demand outstripped supply yet again, which has led to this near-record increase in selling prices. 
“Although July saw UK manufacturers report a further month of solid growth, scarcities of inputs, transport and labour are stifling many businesses,” Dobson said. 
“Amid growing indications that many supply chain disruptions and raw material shortages are unlikely to be fully resolved until 2022, the outlook remains one of constrained growth combined with high inflation for the foreseeable future.”
Despite concerns, the report showed growth across sectors. July’s PMI stood at 60.4, down on June’s figure of 63.9, but still signalled a continued expansion of growth over the past 14 months.
Manufacturing production rose, as companies benefited from new order intakes, rising client confidence and the re-opening of the economy, with 63% of companies forecasting output to increase over the coming year.
Businesses also received greater demand from domestic and overseas markets, reporting improved interest from the US, China, Russia, the Middle East, and the EU, despite some noting constrained exports to the EU due to Brexit issues.
Duncan Brock, group director at CIPS, said the sector was still working to come back to capacity following easing of pandemic-related restrictions. 
“Manufacturing in July was once again unable to maintain the pace of output growth seen earlier this year following the re-opening of the UK economy, as supply gridlock resulted in a moderate deceleration in the rates of expansion of production, new orders and job creation,” Brock said.  
Three-quarters of manufacturing companies have been paying higher prices for commodities due to inflation on input items, he said. Also, firms have faced difficulties in sourcing skilled labour due to people being told to self isolate by the NHS Track and Trace Covid-mangement app, workers changing jobs, and widespread hesitancy around returning to offices. 

Shortfalls in employment and commodities have dampened UK manufacturing’s recent growth, as output and new work orders hit four-month lows, according to the latest PMI.

A triple impact from a lack of available staff, HGV drivers and raw materials remained “a prime concern” for businesses in July, and while the sector remains healthy, supply chains are stretched. 

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index found 72% of manufacturers have encountered cost rises, and input expenses rose at a near survey-record pace. 

Items including chemicals, commodities, electronics, food stuffs and packaging have all been subject to reduced availability and long lead times. 

Rob Dobson, director at IHS Markit, said demand outstripped supply yet again, which has led to this near-record increase in selling prices. 

“Although July saw UK manufacturers report a further month of solid growth, scarcities of inputs, transport and labour are stifling many businesses,” Dobson said. 

“Amid growing indications that many supply chain disruptions and raw material shortages are unlikely to be fully resolved until 2022, the outlook remains one of constrained growth combined with high inflation for the foreseeable future.”

Despite concerns, the report showed growth across sectors. July’s PMI stood at 60.4, down on June’s figure of 63.9, but still signalled a continued expansion of growth over the past 14 months.

Manufacturing production rose, as companies benefited from new order intakes, rising client confidence and the re-opening of the economy, with 63% of companies forecasting output to increase over the coming year.

Businesses also received greater demand from domestic and overseas markets, reporting improved interest from the US, China, Russia, the Middle East, and the EU, despite some noting constrained exports to the EU due to Brexit issues.

Duncan Brock, group director at CIPS, said the sector was still working to come back to capacity following easing of pandemic-related restrictions. 

“Manufacturing in July was once again unable to maintain the pace of output growth seen earlier this year following the re-opening of the UK economy, as supply gridlock resulted in a moderate deceleration in the rates of expansion of production, new orders and job creation,” Brock said.  

Three-quarters of manufacturing companies have been paying higher prices for commodities due to inflation on input items, he said. Also, firms have faced difficulties in sourcing skilled labour due to people being told to self isolate by the NHS Track and Trace Covid-mangement app, workers changing jobs, and widespread hesitancy around returning to offices. 

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