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The Czech Republic’s seasonally adjusted IHS Markit manufacturing PMI climbed in June to 62.7 in June, from 61.8 in May – the best result ever. However, the consultant warned that problems in supply chains could slow growth in the coming months.
“The June PMI data signaled a substantial improvement in the health of the Czech manufacturing sector,†Markit said in a press release. “Overall growth has accelerated at the fastest pace since data collection began in June 2001. The expansion was supported by a stronger recovery in production and new orders, with more flexible COVID-19 restrictions which have boosted sales to domestic and foreign customers. Business confidence also rose in hopes of further growth in orders. “
However, the country is not yet out of the woods of the coronavirus (COVID-19), as significant supply chain disruptions continued to hamper production capacity and drive up input costs, said the panelists from Markit.
Supply chain issues impact business in general. The backlog has grown at the fastest rate since January 2011 despite more rapid employment expansion. The cost burden has increased at the fastest rate on record, with many companies choosing to partially pass higher input prices on to customers, resulting in the largest increase in fees since January 2003.
The increase in the overall index stems in part from a record deterioration in supplier performance, which would normally indicate more robust operating conditions, but rather stems from supplier backlogs and delays.
Nonetheless, with the publication of a year of pent-up demand, output rose sharply in June, with the growth rate reaching its highest level since February 2018.
“The marked increase in production was linked to higher customer demand and the easing of COVID-19 restrictions. Some companies noted that production capacity was limited by hiring issues and supply delays, â€Markit said.
New business also grew at the fastest pace since December 2017 amid stronger domestic and foreign demand. The continued reopening of major export markets would have supported the largest increase in new export orders since late 2017.
A record extension of supplier delays has reportedly been linked to raw material shortages and pressure on supplier capacity. Financial charges then shot up again in June. The rate of inflation of input prices was the highest on record. The increase has often been attributed to further increases in the costs of key materials such as metals, plastics and fuel, reports Markit.
In response to sharp increases in supplier prices, manufacturers increased their selling prices at the fastest rate since data collection began for the series in January 2003. Panelists suggested that costs were partially passed on to customers through higher tariffs.
Meanwhile, goods producers increased their workforce again in June. The recovery in employment was the fastest since December 2017, but was not enough to curb the growth in backlogs. The pressure on capacity continued to grow, with work-in-progress increasing at the fastest rate since January 2011. Companies have often noted difficulties in finding suitable candidates for current vacancies.
In an effort to build up safety stocks, companies have stepped up their purchases of inputs. The increase was the fastest since February 2007, with pre-production inventories rising for the third consecutive month.
Inventories of finished goods declined further as companies sought to supplement their production with their current stocks of finished goods.
Expectations improved in June, with manufacturers being the most optimistic about production prospects in the coming year for five months.
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