Manufacturing sector hits 27-year high despite supply crunch

The UK manufacturing sector surged in April, a closely-watched industry survey showed on Tuesday, but disruptions to the supply chain continued to cast a shadow.
The IHS Markit/CIPS purchasing managers’ index rose to 60.9 in April from 58.9 in March. That was marginally above both consensus and the flash estimate, for 60.7, and the highest reading since a record 61.0 in July 1994.

Both output and new orders improved in April as lockdown restrictions eased and demand picked up, which in turn boosted employment.

Optimism also ticked up, with 66% of companies now believing output will be higher in a year’s time; only 4% expect it to fall. Confidence stands at its highest level for seven years.

However, supply-chain issues continued to dampen progress in some areas. Noted IHS Markit: “The sector remained beset by supply-chain delays and input shortages, which contributed to increased purchasing costs and record selling price inflation.”

Average selling prices rose at the fastest pace since data on charges were first collected in November 1999.

Rob Dobson, director at IHS Markit, said: “Disruption following Brexit and Covid-19, especially at ports, caused a further near-record lengthening of supplier delivery times. The resulting input shortages kept producer price inflation among the highest over the past four years.”

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “As business raced to meet the need for increased capacity, the lost jobs of 2020 returned in greater numbers and employment creation continued in earnest at similar levels to last month and at a pace rarely surpassed in survey history.

“However, the still significant delays in the delivery of goods due to the pandemic, Brexit and the Suez blockage in some sectors hampered further progress.”

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The PMI was boosted gain, counter-intuitively, by supply chain disruptions. The suppliers’ delivery times balance – which falls when delays increase and is inverted for the PMI calculation – remained very low.

“What’s more, UK manufacturers still are underperforming their European peers, due to Brexit: the PMI remained below the Eurozone’s 62.9 for the fourth consecutive month.

“Nonetheless, the jump in the output index, to 59.2 from 56.6 in March, left it just over one standard deviation above its 2010 to 2019 average.”

IHS Markit surveyed its panel of 650 manufacturers between 12 and 26 April.

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