Production growth in the UK manufacturing sector accelerated in April, but business confidence fell to a 16-month low as inflationary pressures continued to rise, with companies saying “everything” cost more last month.
Production increased in the consumer goods, intermediate and investment goods industries, which means that the seasonally adjusted index of purchasing managers at S&P Global / CIPS UK rose to 55.8. This is an increase of 55.2 in March and signals an expansion for 23 consecutive months.
Companies attribute higher production to increased new business admissions, reduced delivery delays from earlier in the year and efforts to clear the backlog, and almost 55% of companies expect production to increase next year.
However, strong headwinds continued to hit manufacturers in April as new order growth fell to its weakest level in the current 15-month upturn, hampered by lower new export acceptance and the impact on demand from rising sales prices. . Input costs rose at the second strongest rate in the history of the survey, as about 85% of companies reported an increase in purchase prices.
“Improved growth in manufacturing, while positive in itself, failed to mask the continuing winds that hit the sector in the early second quarter,” said S&P Global CEO Rob Dobson.
“Manufacturers and their customers are struggling as the blockade in China and the war in Ukraine exacerbate strained global supply chains, the inflation picture worsens and geopolitical tensions rise. Specifically for the United Kingdom, Brexit represents an additional headwind, in particular due to lost EU customers, increased documentation, customs checks and delays at borders. Business optimism has fallen to a 16-month low as companies become more cautious about the future.
A wide range of raw materials reportedly rose in price last month, including chemicals, energy, food, cargo, fuel, gas, metals, oil, plastics, polymers, timber and transport (air, land and sea). Several companies said in their responses to the survey that “everything” costs more.
As manufacturers acted to pass on rising costs, almost 61% of companies reported an increase in sales prices.
Despite this pressure, employment rose for the sixteenth month in a row as companies responded to increased production and growing backlogs prepared for expected future growth and tackled staff shortages.
Purchasing activity also increased for the fifteenth consecutive month; companies report buying raw materials ahead of expected price increases to build up safety margins and prevent further supply chain disruptions.