UK manufacturing growth slows to three-month low in January
By Michele Maatouk
Date: Monday 01 Feb 2021
(Sharecast News) - UK manufacturing growth slowed to a three-month low in January, dented by further Covid-19 restrictions, according to a survey released on Monday.
The IHS Markit/CIPS purchasing managers' index declined to 54.1 from a three-year high of 57.5 in December, when manufacturers stockpiled ahead of the UK's exit from the European Union. Still, this was ahead of a preliminary reading of 52.9.
A reading above 50.0 indicates expansion, while a reading below signals contraction.
Output growth eased and new orders fell slightly as producers faced weaker inflows of new export work and temporary supply-chain disruptions caused by the pandemic and transport delays, particularly at ports, following the end of the Brexit transition period.
Rob Dobson, director at IHS Markit, said: "Whereas many countries are seeing manufacturers provide a much-needed support to economic growth as the service sector is hit by Covid-19, the UK's manufacturing sector has come close to stalling.
"A mixture of harsher Covid-19 restrictions and Brexit led to near-record supply-chain disruptions, lower exports and increased costs. The impact was felt most at consumer goods producers, who reported steep falls in output and new orders. There were also early signs that smaller companies were being hit harder by the tougher operating environment than medium- and larger-scale producers.
"The hope is that the current constraints will start to ease once Covid-19 restrictions are lifted, vaccines are rolled out and ports, suppliers and manufacturers adapt to the new trading environment post-Brexit."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Manufacturers appear to be coping relatively well with the transition to new trade rules with the EU. Admittedly, the PMI currently is boosted, somewhat counterintuitively, by the very low level of the suppliers' delivery times index, which is inverted in the PMI calculation. A low suppliers' delivery times index indicates that manufacturers are struggling to get new components; it is inverted in the PMI calculation as usually this signals that demand is running hot.
"Nonetheless, manufacturers had stockpiled heavily in Q4, anticipating that Brexit would be disruptive, so they are not close to running into component shortages that could disrupt production. In addition, the output index remained in growth territory, despite dropping to 52.5 in January, from 55.9 in December, and new orders were unchanged on the previous month, despite a sharp fall in exports orders reflecting overseas customers also taking Brexit precautions in Q4."
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