Manufacturing increases for 14th month in a row in July but PMI data suggests growth is slowing

Tue 3 Aug 2021
Posted by: William Barns-Graham
Trade News

manufacturing

Pingdemic-related staff shortages and supply chain problems slowed the momentum of growth in UK manufacturing output over July, although the sector’s productivity is still on the up.

IHS Markit’s purchasing managers’ index (PMI) for the sector declined from a record high of 65.6 in June to 60.4 in July.

With any score above 50 indicating growth, July marked the 14th consecutive month of increasing output.

According to the Times, growing business confidence following the removal of social distancing restrictions has allowed manufacturers to increase their production, despite fears about shortages of staff and raw materials.

Input costs up

Reuters reports that 72% of manufacturers reported higher costs for a materials such as chemicals, commodities, cardboard, electronics, foodstuffs, metals, packaging and timber.

In response, factories increased their prices by almost as much as June’s record jump. Exports also gathered pace in July as overseas markets reopened.

Some firms reported clients bringing forward purchases to guard against supply-chain issues, which IHS Markit director Rob Dobson said were unlikely to be resolved before 2022.

August pinch

The logistics sector pointed to an upcoming pinch point in August as the ongoing driver shortage is likely to be further affected by the summer holidays, reports the Guardian.

Shane Brennan, chief executive of the Cold Chain Federation, said the sector was “firefighting”.

“We have got a lot of vacancies but also a lot of workers on holiday. We’ve got a short-term summer problem. We’re going to have interruptions on the shelves – we’re resigned to that,” he added.

Don’t panic

Rona Hunnisett of Logistics UK urged consumers not to panic buy amid signs that retailers are taking matters into their own hands.

Tesco is reportedly offering £1,000 signing-on bonuses for drivers to sign to transport its stock, which Rod McKenzie of the Road Haulage Association said was not a solution.

“This is a real problem because all they are doing is buying talent from somewhere else. They are not creating talent,” he said.

The government has tried to address the driver shortage through increased Covid-19 testing, relaxed driving hour rules and by creating more incentives for would-be drivers to take up work in the industry.