UK factory activity expands at fastest rate since 1994 –PMI

Amid supply chain delays and shortages of raw materials, British manufacturing activity grew at the fastest pace in almost 27 years. The IHS Markit/CIPS Purchasing Managers’ Index (PMI) for manufacturing activity rose to 60.9 in April from 58.9 in March, beating its highest index since July 1994.

Two-thirds of businesses expect production to be higher in a year’s time. IHS Markit said that the sector remained beset by supply-chain delays and input shortages, which contributed to increased purchasing costs and record selling price inflation. But the index was also lifted by lengthening delivery times and rising costs of raw materials – factors which sometimes indicate an imminent pick-up but which are currently hampering growth.

Price pressures are on the radar of the Bank of England. The central bank is likely to look through price rises caused by short-term disruptions. A narrower measure of manufacturing output alone showed weaker growth than the broader activity index. Britain’s economy shrank by almost 10% last year and this is the biggest fall in output in more than 300 years. Even it takes rebound it will be slower than United States.

The impact of the pandemic situation has caused increase in shipping costs and led to shortages of key components such as microchips used for car electronics. British firms also face greater friction trading with their European Union counterparts. IHS Markit said that Optimism reflected expectations for less disruption related to COVID-19 and Brexit, economic recovery, improved client confidence and planned new product launches.