Shortages of inputs and delivery delays disrupted production schedules, leading to slower output growth, and also resulted in marked increases in input prices, but companies nonetheless still achieved solid gains in output, new orders and employment, the PMI said.
The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell to a five-month low of 60.3, a tick below July's 60.4 but above the long-run average of 51.9.
The PMI has signalled an improvement in operating performance in each of the past 15 months. Manufacturing output rose again in August, albeit to the weakest extent since February. Growth eased particularly sharply at intermediate goods producers.
Companies linked higher output to new order gains and the ongoing process of re-opening global economies. Incoming new business rose in August, reflecting increased inflows from both domestic and overseas markets.
On the export front, manufacturers reported increased orders from clients in Europe, China, the US, Asia and South America. The outlook for the UK manufacturing sector also remained bright in August. Almost 66% of companies indicated that they expect output to rise over the coming year, compared to only 4% forecasting a decline.
Confidence rose to a three-month high, reflecting expectations of continued economic revival, stronger global demand, investment plans and hopes that current supply issues would either lessen or even be fully resolved.
Robust confidence among manufacturers supported further job creation during August. Employment rose for the eighth month in a row and to one of the greatest extents in the survey history (albeit also the slowest since April). Staffing levels were raised to increase capacity, meet rising demand requirements and start addressing backlogs of incomplete work.
However, there were also reports from some manufacturers of both labour and skills shortages. Price inflationary pressures continued to build in the UK manufacturing sector in August. Average purchase prices rose at the fourth-fastest rate in the survey history, beaten only by the cost increases seen during May, June and July.
A wide range of items were reported as up in price, as shortages and delivery issues left rising demand chasing reduced supply. Average supplier lead times lengthened to the second- greatest extent in the survey history during August. The only time when delivery delays have been more pronounced was in April 2020 during the first COVID-19 lockdown. Input shortages, shipping delays, a lack of port capacity, transportation issues, Brexit and shortages of logistic industry staff all contributed to delivery delays.
Manufacturers were able to pass on a part of the increase in costs to clients during August. Average selling prices also rose at one of the quickest rates on record.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply: “August’s results were almost a carbon copy of the previous month where recovery for manufacturers continued, but there were signs of stagnation and the rise in overall activity slipped back to the weakest for half a year.
"Businesses were thwarted by brittle supply chains struggling with shortages, port and transportation difficulties as delivery times stretched not to days or weeks, but months for some goods.
“New orders continued to flow in for the seventh month in a row, but a mismatch between supply and demand is affecting the UK economy. There is a question mark over whether supply chain managers have ordered early enough to fulfil customer needs, as the continuing deterioration in supplier performance, close to last year’s pandemic lows could result in meagre offerings on shelves in the shops in the coming months.
“The sector is still optimistic about business opportunities in the next twelve months but there are significant difficulties ahead as a lack of labour and skills, coupled with escalating price inflation on even basic materials dampens prospects for manufacturing for the rest of the year.”
