Relief at last after price rises ease with supply chain holdups ‘past their peaks’ 

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Relief at last after price rises ease with supply chain holdups ‘past their peaks’

  • There were signs in July that cost inflation and supply chain holdups are ‘past their peaks’, according to the Purchasing Managers’ Index from S&P Global 
  • Input prices increased at the weakest pace since January 2021
  • Rob Dobson, director at S&P, said the war in Ukraine and the rise in the cost of living were still presenting risks for manufacturers

Price pressures in the manufacturing sector may be starting to ease, in a relief for hard-up businesses and households. 

There were signs in July that cost inflation and supply chain holdups are ‘past their peaks’, according to the Purchasing Managers’ Index from S&P Global. 

While output from factories contracted for the first time in more than two years, broader activity in the manufacturing sector pulled in at a reading of 52.1 in July – down from 52.8 the previous month, but still above the crucial 50 mark which indicates growth. 

Price pressures in the manufacturing sector may be starting to ease, in a relief for hard-up businesses and households

Input prices, which cover costs such as wages, raw materials and components, increased at the weakest pace since January 2021. Rob Dobson, director at S&P, said the war in Ukraine and the rise in the cost of living were still presenting risks for manufacturers. 

He added: ‘It wasn’t all bad news, though, with further signs that cost inflation at manufacturers and supply pressures are already past their respective peaks. ‘Accelerated job growth as companies address staff shortages was also a plus.’ 

Martin Beck, chief economic adviser to the EY Item Club, said the Bank of England’s rate-setting Monetary Policy Committee should be ‘heartened by the cooling in inflationary pressures’. 

It has been hiking interest rates at an unprecedented pace since last December, in an attempt to get a grip on rising prices, and is set to bump up rates at its sixth consecutive meeting later this week. 

Manufacturing activity across the eurozone also slumped to a 25-month low in July as fears over a recession began to build. Its PMI fell to a reading of 49.8 – below the crucial 50 point mark. 

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