A factory hit by a pandemic-related supply disruption

Global factory activity lost momentum in August, just one day after GDP data showed strong manufacturing growth in the first quarter of the fiscal year, according to a recent survey by purchasing managers by data firm IHS Markit. ..

Research (pdfWe found that the ongoing COVID-19 pandemic disrupted the supply chain, significantly delaying production, delivery and distribution schedules in August.

Many companies report that logistics problems, shortages of products, and tight labor have made the market a seller of goods needed by factories, raising prices.

Factory activity in the euro area remained strong, but IHS Markit’s Final Manufacturing Purchasing Managers Index (PMI) fell to 61.4 in August, just below the previous “flash” estimate of 61.5. It fell from 62.8 in July.

Oxford Economics Mateus Urban told Reuters, “Despite strong PMI numbers, producer price pressures associated with prolonged supply-side problems are slower to resolve than previously expected. We believe that the downside risk to the forecast may increase. “

In Europe, despite slowing growth to its lowest level in five months, the Netherlands again saw the biggest improvement in manufacturing business conditions. More gradual expansion was also recorded in Germany, Ireland, Austria and France.

Greece recorded the highest manufacturing PMI since April 2000, but Italy and Spain also observed an accelerating expansion.

Meanwhile, in the UK, where factories also faced turmoil, manufacturing output in August grew at the slowest pace in six months.

Data released later Wednesday is expected to show a similar slowdown in the United States.

Volvo Cars plant resumes production after a stop in Gothenburg's Torslanda
Inside view of the Volvo Cars plant in Gothenburg, Sweden, April 17, 2020. (AdamIhse / TT News Agency / via Reuters / File photo)

Factory activity in China shrank in August for the first time in more than a year as COVID-19 containment measures, supply bottlenecks, and soaring raw material prices hit the economy.

The country’s Caixin / Markit Manufacturing PMI fell from 50.3 in July to 49.2 in August, breaking the 50 mark that separates growth and contraction, well below market expectations.

Exporters Japan, South Korea and Taiwan also slowed their manufacturing expansion in August, and a shortage of sign chips and factory closures in the region could delay a sustained recovery from the pandemic recession. ..

Canada’s economy contracted unexpectedly in the previous quarter and July, hit by declines in manufacturing, construction and retail, according to official data on Tuesday. Australia reported a slowdown in growth in the second quarter of Wednesday.

Manufacturers were able to pass on some of the additional cost burden to their customers by raising prices. Inflation surged to its highest level in three months, but fell below what was seen in input costs.

Chris Williamson, Chief Business Economist at IHS Markit, commented on the final manufacturing PMI data:

“The most important issue was still the lack of components, but suppliers are either unable to produce enough parts or are facing a lack of transportation capacity to meet their logistics demands.

“These supply problems are the main cause of manufacturing shortages compared to orders of a size not previously recorded in the survey, beyond the 24-year record deficit seen in July. bottom.

“As a result, factory selling prices soared again, but the upward pressure was eased by a slight cooling in input cost inflation, despite increasing manufacturer problems due to still high material prices. it was done.”

To increase capacity, manufacturers increased their workforce in August, continued the employment growth trend that began in February, and job creation rates fell slightly from their all-time highs in July.

Reuters contributed to this report.

Catabella Roberts

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