Press release

1 Sep 2021 London, GB

Supply constraints continue to bite for manufacturers – EY ITEM Club comments

Supply constraints continue to bite for manufacturers – EY ITEM Club comments

Press contact
Annabel Banks

Manager, Media Relations, Ernst & Young LLP

A highly experienced communications professional with cross-sector experience in media relations having worked with global brands spanning elite professional services firms to digital start-ups.

Related topics Growth COVID-19
  • August’s manufacturing PMI of 60.3 was strong by historical standards, but it was also a five-month low. Component shortages and other supply-side issues weighed on the index, although these headwinds should fade over time.
  • Meanwhile, cost pressures faced by manufacturers remained elevated. Growth in input prices eased to a four-month low offering tentative evidence that inflationary pressures in the sector may have passed their peak.  

Martin Beck, senior economic advisor to the EY ITEM Club, says: 

“A manufacturing PMI of 60.3 in August was slightly lower than 60.4 a month earlier. While this was the fourth successive monthly decline in the PMI and the lowest reading since March, the index was still well above the long-run average of 51.9. The details of the IHS Markit/CIPS survey suggested the reason for weaker growth lay with supply rather than demand. New orders continued to grow strongly, but shortages of materials and staff and delivery delays meant manufacturers struggled to satisfy orders.

“Supply constraints should gradually ease as we head into 2022, as production of inputs rises to meet demand. And August’s relaxation of guidance for those contacted by the NHS COVID-19 app should reduce disruption from a lack of staff due to self-isolation. Growth in manufacturers’ input prices, while still elevated, fell to a four-month low in August, offering tentative signs that inflationary pressure from supply problems may have already peaked.

“Demand pressures on manufacturers should also become less marked as the removal of COVID-19 restrictions means consumers spend more on services and less on goods. Granted, if home working – and so less spending on commuting and catering – and worries about COVID-19 persist, the rotation of demand towards goods seen during the pandemic may not unwind fully. But the outlook should deliver a better balance between supply and demand.”