Manufacturing input prices hit 30-year high in November

By Michele Maatouk

Date: Wednesday 01 Dec 2021

Manufacturing input prices hit 30-year high in November

(Sharecast News) - UK manufacturing input prices hit a 30-year high in November amid supply chain issues, according to a survey released on Wednesday.
The IHS Markit/CIPS manufacturing purchasing managers index rose to three-month high of 58.1 from 57.8 in October, but was below the flash estimate of 58.2. A reading above 50.0 signals expansion, while a reading below indicates contraction.

The survey also found that "severely stretched" supply chains disrupted production schedules and drove up input prices to the greatest extent in the 30-year survey history. Firms reported that shortages of components and commodities had combined with input demand outstripping supply.

Rob Dobson, director at IHS Markit, said: "Although November saw rates of expansion in output and new orders gain some traction, growth remains lacklustre compared to the first half of the year. Manufacturers are facing a challenging backdrop, with rising supply chain disruptions, staff shortages and inflationary pressures stifling growth while ongoing difficulties caused by Brexit and logistical headaches restrict opportunities to expand into overseas markets. New export sales fell for the third straight month.

"Firms costs meanwhile continue to surge relentlessly higher, rising at the steepest pace in the three decades of survey history. Stretched supply chains, component shortages and a vast mismatch between demand and supply are all exerting massive upwards pressure on input costs. This is also filtering through to prices charged at the factory gate, which rose at a rate close to October's record high."

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Looking ahead, with manufacturers now hiking prices substantially - the output price index remained among the highest readings in the survey's history, despite edging down in November - growth in demand likely will slow.

"Nonetheless, manufacturers now have such a large backlog of unfulfilled orders that they will be kept busy over the winter even if demand falters. As a result, manufacturing output should gradually converge over the coming months towards its pre-Covid level, having undershot it by 2% in September. The Omicron variant, however, could be a game-changer; shortages of inputs and labour would worsen for manufacturers if the U.K. and other countries went into another lockdown."


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