UK manufacturing growth slows in July amid stretched supply chains
By Michele Maatouk
Date: Monday 02 Aug 2021
(Sharecast News) - UK manufacturing growth slowed in July amid supply chain issues and staff shortages, according to a survey released on Monday.
The IHS Markit/CIPS manufacturing purchasing managers' index fell to 60.4 from 63.9 in June and from May's record high of 65.6. Nevertheless, the PMI has signalled expansion for 14 months.
A reading above 50.0 indicates expansion, while a reading below signals contraction.
Although rates of expansion in output and new orders slowed, they remained among the best in the survey history amid "robust" sales to domestic and export clients. Scarcities remained a prime concern, however, amid stretched supply chains and staff shortages.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: "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.
"A mismatch in global recovery rates following the pandemic meant some businesses abandoned their usual suppliers to seek new sources and avoid elevated lead times and the shortages gripping the sector. Disruption is a worldwide problem however, so there was likely to be limited success in re-modelling supply chains completely with the challenges too difficult to circumnavigate."
Brock said that as more and more supply chain managers chased fewer materials, three quarters of manufacturing companies paid higher prices as the weight of inflation bore down on an increasing number of input items.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Looking ahead, the adverse impact of Covid-19 on production lines should ease over the coming months, thanks to changes to self-isolation rules for doubly-vaccinated workers and an easing of social distancing rules.
"Expanding manufacturers also should be able to source new employees more easily after the furlough scheme has been wound down at the end of September. Nonetheless, demand likely is being supported at present by firms panic-buying goods in order to rebuild their inventories, as well as by high demand for consumer goods, because Covid-19 still is dissuading people from purchasing services. These temporary supports to demand probably will have faded by the end of this year, leaving both goods output and prices vulnerable to fall back in the winter."
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