(Alliance News) -Â The UK manufacturing sector weathered ongoing supply chain pressures to grow at the fastest rate for three months, survey data from IHS Markit showed on Wednesday, but the emergence of the Omicron variant could be a "game-changer".
The IHS Markit/Chartered Institute of Procurement & Supply purchasing managers' index rose to a three-month high of 58.1 in November, up from 57.8 in October. Any reading over the no-change mark of 50.0 indicates expansion.
Output rose for the eighteenth month running in November, supported by new work intakes and efforts to build safety stocks.
However, IHS Markit noted: "There remained widespread mention of input and labour shortages stymieing efforts to raise production, however. This led to existing stocks being depleted to satisfy customer orders."
There was a survey record increase in average purchase prices in November, while selling prices rose at a rate close to October's record. Backlogs of work also rose to a near-record extent with capacity remaining stretched.
Pantheon Macroeconomics said that even though price hikes should lead to slowing demand growth, manufacturers' backlogs are big enough to keep them occupied over the winter.
"As a result, manufacturing output should gradually converge over the coming months towards its pre-Covid level, having undershot it by 2% in September," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
However, the emergence of the Omicron coronavirus variant could throw the manufacturing sector's recovery into question.
"The Omicron variant, however, could be a game-changer; shortages of inputs and labour would worsen for manufacturers if the UK and other countries went into another lockdown," said Pantheon's Tombs.
Despite headwinds facing the sector, IHS Markit said manufacturers remained upbeat over the outlook. Business optimism rose to a three-month high.
"Positive sentiment was linked to Covid recovery, economic growth, new product launches, planned marketing campaigns, business expansions, diversification, innovation and reduced supply chain stress," said IHS Markit.
But data for the survey were collected between November 12 and 25. Omicron was only designated a variant of concern by the World Health Organisation on November 26.
And warnings over the new strain have only intensified in recent days.
The OECD warned Wednesday that Omicron threatens the global economic recovery and the Financial Times reported that Bank of England rate-setter Catherine Mann has warned the Omicron variant could disrupt supply chains, causing inflation pressures to persist longer than expected.
By Lucy Heming;Â lucyheming@alliancenews.com
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