Press release

23 Nov 2021 London, GB

November’s flash PMIs suggest ‘growthflation’ continuing – EY ITEM Club comments

November’s flash composite PMI of 57.7, down from 57.8 in October, slightly eroded the previous month’s unexpectedly strong gain. But it was comfortably above the long-run average of 54.2, as well as the eighth month in a row to exceed the 50 ‘no-change’ mark which separates the IHS Markit/CIPS survey’s measure of expansion from contraction.

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  • Although the flash composite PMI dipped slightly in November, it indicated a still-robust pace of recovery. Services growth continued to outstrip that in manufacturing and inflationary pressures picked up further.
  • Those pressures point to the balance between inflation and growth becoming less favourable in the near term. But the recovery isn’t out of supports, causing the EY ITEM Club to doubt that ‘growthflation’ will turn into ‘stagflation’.
       

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

“November’s flash composite PMI of 57.7, down from 57.8 in October, slightly eroded the previous month’s unexpectedly strong gain. But it was comfortably above the long-run average of 54.2, as well as the eighth month in a row to exceed the 50 ‘no-change’ mark which separates the IHS Markit/CIPS survey’s measure of expansion from contraction.

“The sectoral PMIs revealed services growth continuing to outpace manufacturing growth. The flash services PMI was 58.6, compared to 59.1 in October, with new orders at a five-month high. While the manufacturing index rose to 58.2 from 57.8, it benefitted from prolonged delivery times. Supply chain disruption and shortages continued to affect the sector, with recruitment difficulties also affecting services companies. There was no indication that the end of the furlough scheme had helped to ease labour shortages yet.   

“Supply-side issues contributed to cost and price growth running at record, or near-record, rates, although service providers indicated a slight slowdown in output price inflation. Given the cost of living challenges faced by consumers – from rising prices, to tax rises and the prospect of higher interest rates – the balance between growth and inflation is looking less positive. But a strong jobs market and the healthy financial position of households and businesses mean the EY ITEM Club doubts that the current ‘growthflation’ will tip over into ‘stagflation’.”