Early data suggests August slowdown for UK due to continued staff shortages and supply chain issues

Tue 24 Aug 2021
Posted by: William Barns-Graham
Trade News

A flash Purchasing Managers’ Index from the Chartered Institute of Procurement & Supply (CIPS) and IHS Markit suggests the UK will see a slowdown in growth in August.

The predicted PMI score for the month is 55.3, down from 59.2 in July. Any score above 50 indicates growth.

The reading – which is lower than many analysts expected – affects both services and manufacturing.

Supplier delays

Staff shortages and supply chain problems were among the factors raised as contributing to the slowdown by Chris Williamson, the chief business economist at IHS Markit.

“Supplier delays have risen to a degree exceeded only once before, in the initial months of the pandemic,” he told the FT.

“The number of companies reporting that output had fallen due to staff or materials shortages has risen far above anything ever seen previously in more than 20 years of survey history,” he added.

Slower gear

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, told the Times that the CIPS/IHS Markit figures indicated that the economic recovery is starting to be choked off by supply constraints.

“All told, Markit’s survey supports our longstanding view that after a strong rebound in quarter two, the recovery would shift down to a much slower gear in the second half of the year,” he said.

Stock adequacy

A separate study from the Confederation of British Industry (CBI) came to a similar conclusion, with employers reporting growing orders but being frustrated by capacity constraints.

The ‘CBI Industrial Trends Survey’ also found that stock adequacy is at its lowest level in 63 years.

Alpesh Paleja, lead economist at the CBI, said in a statement accompanying the report: “Many firms are feeling the pinch from ongoing supply chain disruption, which also partly explains the continued strength in pricing pressures. Despite the rebound in activity, ongoing disruptions could choke off future manufacturing growth”.