Production at UK factories in August rose at the lowest rate in six months as supply chain challenges affect manufacturers’ recovery from the Covid-19 crisis, according to IHS Markit.
The IHS Markit / CIPS UK Manufacturing Purchasing Managers index fell to 60.3 last month from 60.4 in July. While the figure was still above the 50 mark that separates contraction and growth, the reading showed manufacturing was growing at its slowest pace since February.
Rob Dobson, director of IHS Markit, said severe supply chain disruptions and raw material shortages “eroded the growth momentum of UK manufacturing in August”.
“While solid production gains and new orders have been made, companies have reported significant delays in production, delivery and distribution schedules,” he said.
“A wide range of factors have contributed to the disruption, including port capacity issues, international delivery delays, the reimposition of Covid restrictions at some key points in global supply networks and ongoing issues after Brexit.”
Global shipping problems, limited supplies of semiconductors and shortages of some goods such as motor vehicles have all contributed to rising inflation in many countries, including Britain.
British auto production, for example, plunged to its lowest in July since 1956 as the global chip shortage hit the industry.
The problem is hampering recovery from Britain’s lockdown, with businesses experiencing a sharp slowdown in August as business is hampered by staff shortages and supply chain issues.
A flash reading of the IHS Markit / CIPS Composite Purchasing Managers Index, fell for the third month in a row, while a separate survey of small and medium-sized manufacturers showed that nearly all are struggling with cost pressures.
Stuart Cole, chief macroeconomist at brokerage firm Equiti Capital, said the strong manufacturing PMI provided further signs that activity in the UK was slowing as input shortages and delivery delays weighed on the market. activity.
Perhaps more worryingly, the survey also showed that price pressures continue to intensify, with input and selling prices reaching record levels as demand continues to outstrip supply, ”a- he declared.
“The willingness of consumers to accept higher final prices will concern the Bank of England, as it suggests that an element of sustainability is creeping into what until now was seen only as transitory inflationary pressures and may be a sign that households are drawing on excess savings stock. accumulated during the pandemic, effectively giving themselves a pay rise, to finance purchases. “
Meanwhile, global challenges also constrained supplies of raw materials in the eurozone, despite manufacturing growth remained strong in August.
The easing of Covid restrictions is boosting demand, but many companies have reported logistics issues, product shortages and a labor shortage.
IHS Markit’s final manufacturing PMI fell to 61.4 in August from 62.8 in July, while unemployment in the economic bloc fell to 7.6% in July from 7.8% the previous month.
“The drop in the unemployment rate, seen in almost all member states, indicates that many companies are rehiring workers they may have had to lay off amid the closures,” said Josie Dent, chief economist at the Center for Economics and Business Research.
Separately, annual inflation in the euro area for the month of August was estimated at 3%, in a flash estimate by Eurostat. This represents an increase from 2.2% inflation in July and brings inflation at its highest level since November 2011. It was also 3 percent Inflation was last higher than in 2008 when the global financial crisis hit. “
Update: September 1, 2021, 3:28 p.m.