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Brighter Manufacturing Picture Marred By Supply Delays And Record Price Hikes

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  • Strong global manufacturing production reported in March, but growth stymied by supply constraints.
  • Rising backlogs of work hint at further robust expansion in second quarter.
  • But inflation concerns are fanned by record rise in factory gate prices.

Global manufacturing output growth accelerated in March to one of the fastest rates seen over the past decade. The further improvement occurred despite near-record shortages of inputs, the lack of which was a principal factor behind the largest accumulation of backlogs of uncompleted orders since 2010.

These rising backlogs point to strong production growth through to the second quarter, assuming the supply situation improves. Delays from the Suez Canal blockage could add to these delays, however, resulting in a further short-term constraint on production.

More encouragingly, a brightening outlook has encouraged firms to boost capacity by adding to payroll numbers at the fastest rate for over two years.

The consequence of higher demand and constrained supply has been rising prices. March saw the largest increase in prices charged for manufactured goods recorded since data were first available over ten years ago.

Production growth strengthens

The JPMorgan Global Manufacturing PMI, compiled by IHS Markit from its proprietary business surveys, showed worldwide factory output growing for a ninth successive month in March. Moreover, the rate of growth accelerated to a pace just shy of last November's recent peak, hitting the second-highest since the start of 2018. The latest monthly expansion has only been exceeded three times since February 2011.

The upturn was led by a record surge in eurozone manufacturing production (fueled in turn by a record upswing in Germany), accompanied by strong growth in the US and a notable rebound from near-stalled production in the UK. In Asia, Japanese producers reported the sharpest gain for 27 months, while China's output growth slowed to the weakest since last April. Nonetheless, further robust upturns in Taiwan, South Korea, Indonesia, and Vietnam all helped sustain output growth in the rest of Asia at one of the fastest rates seen over the past decade (data for India are released 5th April).

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IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 80 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.

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