CIPS/NTC report sees output costs continue to soar

Posted on 1 Apr 2008 by The Manufacturer

The CIPS/NTC Purchasing Managers’ Index report on manufacturing has identified record-breaking output price inflation for March, with costs rising at the second strongest rate since the survey began.

The rate of output growth fell to a 15-month low during March due to continued inflationary pressures.

The headline seasonally adjusted CIPS/NTC Purchasing Managers’ Index (PMI) was unchanged from February’s reading of 51.3. This was the 32nd successive month of above-neutral (50.0) readings.

Performance for each of the manufacturing market groups varied significantly during March. The rate of increase in consumer goods output was noticeably stronger than production for both intermediate or investment goods. Growth of intermediate goods production fell back sharply as new orders contracted for the first time since August 2005. Trends in output and new work received in the capital goods sector recovered slightly following the contractions posted one month ago.

Overall, output in the sector increased for the 34th month running – the seasonally adjusted Output Index showed a reading of 52.3, which was the lowest reading since December 2006. Total new orders fell slightly for the third successive month, and new export business was unchanged from February’s levels. Slower global economic growth, particularly in major trading partners such as the US and Europe, was blamed by some firms as having hindered efforts to raise export activity.

The Input Prices Index rose to 76.3 for March, up from 72.7 in February. This was mainly due to high oil prices and was the second highest reading in survey history.

Employment experienced a slight rise during March, with the seasonally adjusted Employment Index posting a reading of 50.8.

“March saw a tougher time for UK manufacturers as inflationary pressures added to their uphill struggle against rising input costs,” said Roy Ayliffe, director of professional practice at CIPS. “Purchasing managers reported high increases in input prices of essentials such as oil, chemicals and transportation which were compounded by the weakness of sterling against the Euro and the cost of raw materials sourced in the Eurozone.

“On a more positive note, the UK manufacturing sector continued to increase its overall output and, after months of decline, employment levels rose as companies, particularly in the consumer and intermediate goods sectors, added to their workforce for the first time this year.”