Factories seeing prices rise at fastest pace in 30 years

Prices in Britain’s manufacturing sector have risen at the fastest pace in three decades, closely watched figures show.

Supply chain disruption remains a major problem across the industry, with orders from China and global export levels, IHS Markit/CIPS UK said in its latest UK manufacturing purchasing managers index.

Tensions in the supply chain have led to shortages of the components many manufacturers need to make their products, increasing the cost of these components and raw materials.

Rising: UK manufacturing prices have risen at fastest pace in three decades, according to IHS Markit/CIPS

But UK manufacturing growth still accelerated for the second straight month in November, despite tight supply chains.

IHS Markit Director Rob Dobson said: “While production picked up in November and new orders gained momentum, growth remains weak compared to the first half of the year.

“Manufacturers face a challenging backdrop, with increasing supply chain disruptions, staff shortages and inflationary pressures stifling growth, while ongoing difficulties caused by Brexit and logistical difficulties limit opportunities to expand into overseas markets.”

Data: UK manufacturing activity rose last month, but pressure remains

Data: UK manufacturing activity rose last month, but pressure remains

He added: “The current mix of supply-side constraints, cost increases, skills shortages and rising labor demand will contribute to expectations of an imminent central bank rate hike, but the survey shows how the moderate pace The production growth and export decline puts the industry in a vulnerable position to new headwinds, not least the Omicron variant.’

The survey of manufacturers found that manufacturing companies in the UK ramped up production for the 18th consecutive month in November.

Although the sector has been growing for months, the pace of growth is slowing down.

It was not until October that the sector began to reverse a five-month slowdown, which continued last month.

The latest UK manufacturing PMI for November came in at 58.1 from 57.8 in October and 57.1 in September. This remains lower than the score of 60.3 in August. Anything above 50 indicates growth.

About three-quarters of the survey respondents said prices had risen, while less than one in a hundred reported a decline.

Duncan Brock, group director at the CIPS, said: “New order flows exacerbated the production capacity problem with the fastest inflow in three months, and it was the domestic market that made up the bulk of the new work.”

“Export orders fell again as long lead times, port and shipping issues caused some customers to lose patience and choose to source elsewhere.”

Sub-sectors: a graph showing output in different elements of the UK manufacturing sector

Sub-sectors: a graph showing output in different elements of the UK manufacturing sector

Martin Beck, chief economic adviser to the EY Item Club, said: ‘There were no signs that supply chain problems were easing. And higher fuel, energy and commodity prices, along with input demand outpacing supply, helped cost pressures rise at the fastest rate in the study’s 30-year history.

“The new Omicron Covid-19 variant will affect these factors. New restrictions in the UK and abroad could disrupt the supply chain in the short term and slow down the pace at which bottlenecks are resolved.

But positively for manufacturers, tighter restrictions could slow the shift in consumer spending from goods to services, albeit a development that would increase supply pressure.

In addition, oil prices have fallen by more than 10 percent since Omicron’s announcement, which will cut costs for energy-intensive producers. So although it is still too early to make statements about the economic effects of the new variant, the consequences for the manufacturing industry may not all be negative.’

This week, Made UK warned that British manufacturers are facing a ‘perfect storm’ crisis of rising costs and mounting debt that many fear will push them over the edge.

Fluctuations: A graph showing production output and production levels over time

Fluctuations: A graph showing production output and production levels over time

The leading trade association urged the government to introduce loan payment holidays and warned that thousands of companies were facing a “tipping point” that could make their business models unfeasible.

Make UK said the British manufacturing sector faced an ‘unprecedented combination of credit, money and cost crises’ after the corona crisis.

It said factories struggled with the burden of paying back debts that had piled up to help them through the pandemic, as well as a range of other challenges, from supply chain disruption to truck driver shortages and energy costs.

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