Supply chain managers 'increase orders to build stocks'

4 May 2021

April saw an acceleration in the rate of expansion of the UK manufacturing sector despite supply chain delays and input shortages, according to the latest PMI.

The IHS Markit/CIPS Purchasing Managers’ Index rose to 60.9 in April, up from 58.9 in March. The reading is the highest since July 1994's record high (61.0).

Manufacturing production increased for the eleventh successive month, with output growth attributed to loosening of lockdown restrictions, improved demand and rising backlogs of work. Solid expansions of output were seen across the consumer, intermediate and investment goods industries.

April also saw a marked improvement in intakes of new business. Total new orders rose for the third straight month due to a further revival of domestic market conditions. 

Manufacturing employment also rose for the fourth successive month, with the rate of job creation staying close to March's seven-year high.

The outlook for the UK manufacturing sector remained positive, with two-thirds (66%) of survey respondents forecasting that output will be higher in a year's time. The overall degree of confidence in the sector stood at its highest level in seven years. 

However, supply chain delays and input shortages led to another near-record lengthening of vendor lead times. Manufacturers attempted to protect themselves against further delivery delays and rising input costs by stepping up purchasing to one of the greatest extents in the survey history.

Duncan Brock, group director at CIPS, said: “The manufacturing sector was flooded with optimism in April as the PMI rose to its highest level since July 1994, bolstered by strong levels of new orders and the end of lockdown restrictions opened the gates to business.

“As businesses raced to meet the need for increased capacity, the lost jobs of 2020 returned in greater numbers and employment creation continued in earnest at similar levels to last month and at a pace rarely surpassed in the survey history.

“However, the still-significant delays in the delivery of goods due to the pandemic, Brexit and the Suez blockage in some sectors hampered further progress on two counts. The slow delivery of goods motivated supply chain managers to increase their order numbers and try to build up recently unravelled stocks leading to further hold-ups, and the injection of more inflationary pressures into the economy. 

“Price rises were amongst the highest in the last three decades and shortages in some essential materials intensified. This in turn led to customers paying more and at a rate not seen since records began in late-1999. This is likely to filter down to consumers before too long.”

Rob Dobson, director at IHS Markit, added: “Further loosening of Covid-19 restrictions at home and abroad led to another marked growth spurt at UK factories. The headline PMI rose to a near 27-year high, as output and new orders expanded at increased rates.” 

Dobson also noted the supply chain issues and “rising inflationary pressures” impacting manufacturing.

“Manufacturers have generally passed on these costs to customers, as highlighted by a survey-record rise in selling prices, but it is hoped that this inflationary backdrop will subside once supply and demand come back into line as covid-related logistic delays ease.”

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