Is easing factory inflation just temporary respite?

Will Green is news editor of Supply Management
1 March 2022

Cost increases in the UK manufacturing sector started to moderate in February, according to the latest PMI.

Although input price inflation remained elevated – with companies reporting rises across chemicals, electronics, energy, foodstuffs, and metals – the rate of increase eased further from recent highs.

However, warnings were sounded that the conflict in Ukraine could push commodity prices higher.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index climbed to a three-month high of 58 in February, up on 57.3 in January and against the no-change reading of 50.

Faster ouput growth, new orders and stocks of purchases helped lift the PMI, reflecting stronger domestic demand, new customer wins, looser Covid restrictions, and improved market conditions.

Average vendor lead times lengthened for the 32nd consecutive month, but there were signs supply chain disruptions had passed their peak.

Duncan Brock, group director at CIPS, said: “There were certainly several positives for the UK’s manufacturing sector in February as 64% of manufacturing businesses remained optimistic. 

“However, this success comes with a health warning as the Ukrainian crisis deepens and the potential for higher commodity prices, disruptions to supply and economic pain must be considered by businesses as they try to build resilience into their supply chains in the coming months.”

Rob Dobson, director at IHS Markit, said: “Companies were hit hard by rising transportation, energy and commodity prices, leading to further increases in selling prices.

“That said, rates of inflation for input costs and output charges eased further. Although this easing may have provided some temporary respite, signs that energy and oil prices may stay high is a further cause for concern.”

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