Cost inflation begins to slow: relief at last after producer prices rise as supply chain ‘beyond their peaks’
- According to S&P Global’s Purchasing Managers’ Index, there were signs in July that cost inflation and supply chain slowdowns are “past their peak.”
- Import prices rose at the weakest pace since January 2021
- Rob Dobson, director of S&P, said the war in Ukraine and the rise in the cost of living still pose risks for manufacturers
Price pressures in the manufacturing sector may begin to ease, a relief for ailing businesses and households.
According to S&P Global’s Purchasing Managers’ Index, there were signs in July that cost inflation and supply chain slowdowns are “past their peak.”
While factory production contracted for the first time in more than two years, broader manufacturing activity picked up 52.1 in July – down from 52.8 a month earlier, but still above the crucial 50 that points to growth.
Manufacturing price pressures may begin to ease, which is a relief for ailing businesses and households
Input prices, which cover costs such as wages, raw materials and components, rose at the weakest pace since January 2021.
Rob Dobson, director of S&P, said the war in Ukraine and the rise in the cost of living still pose risks for manufacturers.
He added: ‘It wasn’t all bad news, though, with further signs that cost inflation among manufacturers and supply pressures have already passed their respective peaks. “Accelerated job growth as companies tackle staff shortages was also a plus.”
Martin Beck, chief economic adviser to the EY Item Club, said the Bank of England’s monetary policy rate-setting committee “needs to be strengthened by the cooling of inflationary pressures”.
It has been raising interest rates at an unprecedented pace since December last year in a bid to get a handle on rising prices, and will raise interest rates later this week at its sixth consecutive meeting.
Manufacturing activity across the eurozone also fell to a 25-month low in July as fears of a recession began to mount. The PMI fell to 49.8 – below the crucial 50 points.