United Kingdom: Composite PMI stays upbeat in November, but supply shortages and higher input prices bite
The IHS Markit/CIPS Flash Composite Purchasing Managers’ Index (PMI) came in at 57.7 in November, down from October’s 57.8. Consequently, the index remained entrenched above the 50-threshold, signaling a strong improvement in business conditions from the previous month.
The services PMI dipped marginally in November but remained upbeat, with new orders growth accelerating to a five-month high and new export orders posting the best reading in over three years, supported by looser travel restrictions. However, input prices rose at a record rate, which together with a slower rise in output prices saw margins squeezed. The manufacturing PMI rose slightly, aided by stronger rises in output, new orders and employment. However, firms continued to report that supply shortages of materials and workers held back production, while input inflation rose to a record high.
Regarding the latest reading, Chris Williamson, chief business economist at IHS Markit, commented:
“For policymakers concerned about the health of the labour market after the end of the furlough scheme, the buoyant jobs growth signalled should bring some reassuring comfort. A record increase in firms’ costs will meanwhile further stoke fears that inflation will soon breach 5%, with lingering near-record supply delays adding to indications that price pressures may show few signs of abating in the near-term.”