United Kingdom: Supply-side pressures lead Composite PMI to moderate in July
July 23, 2021
The IHS Markit/CIPS Flash Composite Purchasing Managers’ Index (PMI) came in at 57.7 in July, down from June's 62.2. The index thus remained entrenched above the 50-threshold, but signaled a softer improvement in business conditions from the previous month.
Both the manufacturing and services PMIs dipped amid supply-side pressures, with shortages of raw materials, Covid-19 isolation and staff take-up of unused holidays all taking their toll on the economy. That said, the overall demand landscape remained sunny amid easing Covid-19 restrictions, which led firms to continue increasing employment—albeit at a slower rate compared to June’s peak, due to difficulty filling vacancies. The combination of supply constraints, recruitment problems and still-solid demand saw record input cost inflation. However, output price inflation eased from June’s record high.
On the implications of July’s reading, Chris Williamson, chief business economist at IHS Markit, commented:
"Although the July flash survey only covered three days of the full easing of covid restrictions, any imminent re-acceleration of growth in August looks unlikely due to a steep slowing in overall new order growth recorded during July. Concerns over the Delta variant have meanwhile overshadowed the passing of 'freedom day', and were a key factor alongside Brexit and rising costs behind a sharp slide in business expectations for the year ahead, which slumped to the lowest since last October.”