Manufacturers say 'everything' costs more

Will Green is news editor of Supply Management
3 May 2022

Manufacturers have reported that “everything” is costing more as selling prices rise at record pace, according to the latest PMI.

A broad range of inputs cost more in April, including chemicals, energy, food, freight, fuels, gas, metals, oil, plastics, polymers, timber, and transport.

Market forces, the war in Ukraine, general inflationary pressures, and China lockdowns have also contributed to higher costs.

In turn, around 61% of manufacturers reported an increase in selling prices, compared to less than 1% cutting them.

The S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index rose to 55.8 in April, up on 55.2 in March and against the 50 no-change reading.

Higher production was linked to increased new business, reduced delivery delays compared to earlier in the year, and efforts to clear backlogs of work.

However, new order growth slipped, as rising prices hit demand and weaker foreign demand reflected subdued conditions in overseas markets, the war in Ukraine, and transport issues.

Lacklustre demand from the EU was linked to longer delivery times, customs checks, and higher shipping costs post-Brexit.

Business confidence fell to a 16-month low, with almost 55% of firms expecting output to rise over the next 12 months.

Rob Dobson, director at S&P Global, said: “The inflationary situation is getting increasingly fraught. 

“Input costs rose to the second-greatest extent in the 30-year survey history, leading to a record increase in factory gate selling prices. 

“Around 85% of manufacturers reported higher purchasing costs, compared to no reports of a decrease, with several firms simply noting that ‘everything’ was up in price.

“Worryingly, consumer goods producers reported record increases in both output charges and input costs, which is likely to further constrain household spending and reinforce the cost-of-living crisis.”

Duncan Brock, group director at CIPS, said: “It is difficult to see where ongoing growth will come from in the coming months as new order growth was the most sluggish in over a year. 

“Higher costs and shortages took a bite out of potential opportunities with clients hesitating to place orders and Brexit obstacles weighing down as work from overseas shrank for a third month in a row.”

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