Stretched supply chains fuel renewed inflation pressure for UK manufacturers

UK factory production growth slowed last month as squeezed supply chains helped drive up inflationary pressure, a survey shows.

Nevertheless, overall activity across the manufacturing industry ticked up last month.

The S&P Global UK manufacturing PMI survey, watched closely by economists, showed a reading of 51.9 in September, up from 51.7 in August.

Any reading above 50.0 indicates activity is growing, while any score below means it is contracting.

September’s reading marks the 11th month in a row that overall activity has risen, with levels of output, new orders for manufacturers and employment all expanding.

However, the pace of manufacturing output growth – meaning the amount that factories produce – slowed in September to the weakest level across the past six-month period of expansion.

Companies’ supply chains were under pressure during the month, with average delivery times increasing, which reflected the impacts of port congestion, shipping delays, and geopolitical tensions leading to raw material shortages, according the survey.

Stretched supply chains put pressure on purchasing costs, with the rate of input price inflation – which measures the price of materials and components bought by manufacturers – accelerating for the first time in four months.

This was linked to higher costs for chemicals, electronics, energy and food, while a spike in diesel prices pushing up transportation costs was cited by many firms surveyed.

Rob Dobson, director at S&P Global Market Intelligence, said: “The big shift in September was in the survey’s price measures, which switched from signalling a decline in inflationary pressures to a renewed uplift.

“Energy and electronics prices remain especially elevated, while supply disruptions and rising diesel prices are now hitting transportation costs across industry.”

Mr Dobson said the autumn Budget, due to be delivered by the Chancellor later this month, will “likely prove material in steering confidence” among businesses.