British factory output in August grew at the weakest rate for six months as supply chain challenges affect manufacturers’ recovery from the Covid-19 crisis, according to IHS Markit.
The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index fell to 60.3 last month from 60.4 in July. While the figure was still above the 50 mark that separates contraction and growth, the reading showed manufacturing growing at its slowest pace since February.
Rob Dobson, director at IHS Markit, said severe disruptions to supply chains and raw material shortages “eroded the growth momentum of UK manufacturing in August”.
“Although solid gains in output and new orders were achieved, companies reported that production, delivery and distribution schedules were experiencing substantial delays,” he said.
“A wide range of factors contributed to the disruption, including port capacity issues, international shipping delays, the re-imposition of Covid restrictions at some key points in global supply networks and ongoing issues post Brexit.”
Global shipping problems, tight supplies of semiconductors and shortages of some goods such as motor vehicles have contributed to rising inflation in many countries – including Britain.
UK car production, for example, plunged to its lowest July level since 1956 as the global microchip shortage hit the industry.
The issue is hampering Britain’s post-lockdown recovery, with businesses suffering a sharp slowdown in August as activity was hampered by staff shortages and supply chain challenges.
The easing of Covid restrictions is driving demand but many firms have reported logistical troubles, product shortages and a labour crunch.
IHS Markit’s final manufacturing PMI fell to 61.4 in August from July’s 62.8, while unemployment in the economic bloc dropped to 7.6 per cent in July from 7.8 per cent the month before.
“The falling unemployment rate, observed across nearly all member states, signals that many businesses are rehiring the workers they may have had to let go amid lockdowns,” said Josie Dent, managing economist at the Centre for Economics and Business Research.
“Separately, annual inflation in the eurozone for the month of August was estimated to stand at 3 per cent, in a flash estimate by Eurostat. This is up from 2.2 per cent inflation in July, and takes inflation to its highest level since November 2011, when it also stood at 3 per cent. Inflation was last higher than this in 2008, when the global financial crisis hit.”