Services input cost inflation at 25-year high

Will Green is news editor of Supply Management
3 November 2021

Input cost inflation in the UK services sector hit a 25-year high in October, according to the latest PMI.

Stronger demand, staff shortages and stretched supply chains contributed to a spike in inflationary pressures, with operating expenses and prices charged by service providers increasing at the steepest rates since July 1996.

The IHS Markit/CIPS UK Services Purchasing Managers’ Index climbed to 59.1 in October, up on 55.4 in September and against the no-change reading of 50.

Around 59% of survey respondents reported a rise in cost burdens, covering energy, fuel, raw materials, transport and staff.

Cost pressures saw business optimism about the year ahead ease for the second month running to its lowest since January.

The rise in new order volumes was the steepest for four months with respondents commenting on rising business and consumer spending after the rollback of pandemic restrictions.

Duncan Brock, group director at CIPS, said the sector had a “surprisingly good month” but added: “Escalating business costs remain deeply concerning as salaries rocketed along with fuel and energy costs and material shortages as a result of supply chain disorder.

“A third of supply chain managers reported stronger job creation as vacancies grew to meet fresh demand, but many struggled to find the right staff from ever-decreasing numbers of job seekers.”

Tim Moore, economics director at IHS Markit, said: “Looser international travel restrictions and greater domestic mobility helped to lift the UK service sector recovery out of its recent malaise in October.

“Business activity expanded at the fastest pace since July, driven by the first acceleration in new order growth for five months. The latest survey also pointed to the best month for export sales since June 2018.”

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