Factory input price inflation jumps by most since 1992 due to Iran war – survey

Britain’s manufacturing sector has seen the biggest monthly jump in input prices for more than 30 years as the Iran war wreaks havoc on supply chains, according to a survey.

The S&P Global UK manufacturing purchasing managers’ index (PMI) survey, watched closely by economists, showed that the input price inflation index jumped by 15 points between February and March – the biggest rise since the UK withdrew from the European Exchange Mechanism (ERM) on so-called Black Wednesday in 1992.

The report also showed that delivery delays worsened due to the Middle East conflict as ships have been forced to re-route around the blocked Strait of Hormuz, which is a key shipping route.

Manufacturing production also contracted for the first time in six months in March, according to the survey.

Overall activity slipped back, with the PMI recording a reading of 51 in March, down from 51.7 in February and lower than the 51.4 flash estimate earlier this month.

Any reading above 50 indicates that activity is growing while any score below means it is contracting.

Rob Dobson, director at S&P Global Market Intelligence, said: “UK manufacturing output contracted for the first time in six months in March, as the war in the Middle East and ongoing concerns about domestic economic policy led to a scaling back of production.

“The impact of the war also caused noticeable shifts in the cost and supply chain backdrops.

“Delivery times lengthened to the greatest extent since mid-2022, while the acceleration in input price inflation was the steepest since the aftermath of the UK’s withdrawal from the ERM in 1992.”

The survey found that almost half of companies (49%) reported an increase in purchase prices, while only 2% saw a decrease last month.

It said the Iran conflict had a “marked” impact on supply chains, with average vendor delivery times growing by the most in more than four-and-a-half years.