By Ian McConnell
UK companies have flagged staff shortages and supply-chain issues as key constraints on activity, in a survey showing expansion this month is the slowest in the current run of growth which began in March.
The latest seasonally adjusted, flash composite output index for the UK services and manufacturing sectors, published yesterday by the Chartered Institute of Procurement & Supply and IHS Markit, is down sharply at 55.3. Although this remains well above the 50 no-change mark, it is well adrift of the final reading of 59.2 for July and thus signals a sharp slowing of growth.
CIPS and IHS Markit noted “efforts to rebuild capacity and strong optimism towards the business outlook contributed to the fastest rise in employment numbers since the index began in January 1998”.
However, they added: “Weaker recoveries were seen in both the manufacturing and service sectors...Analysis of comments provided by survey respondents suggested that incidences of reduced output due to shortages of staff or materials were fourteen times higher than usual and the largest since the survey began in January 1998.”
Chris Williamson, chief business economist at IHS Markit, said: "Although the PMI indicates that the economy continues to expand at a pace slightly above the pre-pandemic average, there are clear signs of the recovery losing momentum in the third quarter after a buoyant second quarter."
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He added: "Despite Covid-19 containment measures easing to the lowest since the pandemic began, rising virus case numbers are deterring many forms of spending, notably by consumers, and have hit growth via worsening staff and supply shortages.
"Supplier delays have risen to a degree exceeded only once before – in the initial months of the pandemic – and the number of companies reporting that output had fallen due to staff or materials shortages has risen far above anything ever seen previously in more than 20 years of survey history. In manufacturing, sectors including automotive production and electrical goods have fallen into decline due mainly to supply constraints."
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