There is growing evidence from industrial surveys that supply chains are starting to ease in some areas of manufacturing, although the global economy is still far from ‘normal’ as we enter 2023 and a return to growth is a long way off.

According to the IFO research institute, companies in Germany are experiencing ‘noticeably fewer’ material shortages than previously.

In December, 50.7% of manufacturing companies surveyed said they had experienced problems compared with 59.3% in November, marking three consecutive months of easing supply shortages.

Shortages were still acute for makers of cars and industrial equipment, but those relying on commodities such as chemicals, paper or raw metals saw far fewer problems, with even timber and wood products for the building industry in reasonable supply.

The December Global Manufacturing Purchasing Managers Survey, produced by J.P.Morgan (JPM:NYSE) and S&P Global (SPGI:NYSE), flagged ‘signs that the outlook for production volumes may be stabilising, as business optimism rose to a four-month high and the cyclically sensitive new orders-to-finished goods inventories ratio edged higher’.

The survey said input inventories fell as companies were able to use ‘safety stocks built up in response to supply disruptions earlier in 2022’.

There was also good news on prices, as the rate of inflation in input and output costs fell to its lowest in two years.

Anecdotally, several UK firms have pointed to easing supply chain pressures of late.

Mobility solutions group Redde Northgate (REDD) and logistics firm DX (DX.:AIM) both told Shares recently that the supply of light commercial vehicles, essential for both their businesses, had improved significantly since the summer.

On 4 January computer board and systems maker Concurrent Technologies (CNC:AIM) raised its revenue forecast for 2022 thanks to an easing of supply chain pressures which enabled it to step up production in November and December resulting in record sales.

It isn’t all good news, however, as the same industrial surveys are pointing to a sharp slowdown in new orders as the economy cools.

According to the Global Manufacturing PMI Survey, new orders fell at the quickest pace for over two-and-a-half years in December with new export business ‘declining to one of the greatest extents since mid-2020’.

The UK Manufacturing PMI Survey says the decline in new business in December was ‘worryingly steep, as weak domestic demand was accompanied by a further marked drop in new orders from overseas’.

Material technology group HEIQ (HEIQ) warned last week that its customers were ‘more hesitant to invest in innovations’, leading to delays in orders and milestone payments, causing its shares to fall 50% in a day.

‹ Previous2023-01-12Next ›