Scarcities remained a prime concern, however, as stretched supply chains and staff shortages were constraints preventing faster growth of output and employment.
The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) posted 60.4 in July, down further from May's record high of 65.6. The PMI has signalled expansion for 14 months. Growth slowed across the consumer, intermediate and investment goods industries.
Manufacturing production rose for the 14th consecutive month in July, as companies benefited from increased new order intakes, rising client confidence and the re-opening of the economy. New business inflows reflected stronger demand from domestic and overseas markets.
There were also reports of clients bringing forward purchases to guard against supply-chain issues. That said, rates of growth in both output and new work both eased to four-month lows. July saw a further increase in new export business.
The investment goods sector saw by far the steepest increase. Companies reported improved demand from the US, the EU, China, Russia and the Middle-East, although some noted that Brexit issues constrained exports to the EU.
Scarcities, shortages and price rises remained prominent challenges faced by UK manufacturers during July. Raw material, staff and skill shortages were all major factors stymieing output growth and contributing to a further marked increase in input purchasing.
Solid jobs growth continued, but the rate was insufficient to prevent a further increase in backlogs. Logistic delays caused by stretched international supply chains meanwhile led to a further marked lengthening of supplier lead times during July. Raw material shortages, disruption caused by Covid-19 and Brexit and capacity issues across the distribution network (including delays at ports, freight and shipping services) also contributed to delivery delays.
With demand outstripping supply, price pressures continued to grow during July. Average input costs rose at a near survey-record pace, with over 72% of manufacturers seeing an increase. A vast array of items increased in cost, including chemicals, commodities, cardboard, electronics, food stuffs, metals, packaging and timber products. The pass-through of higher input costs led to a further substantial rise in output charges, which rose at a near-identical pace to June's series-record.
The outlook for the manufacturing sector remained on the upside in July, with 63% of companies forecasting output to rise over the coming year. Positive sentiment was linked to improving market conditions and reduced uncertainty surrounding both the post-Brexit and post-pandemic trading environment.
