UK PMIs: Manufacturing beats forecasts again on Brexit stockpiling boom
UK manufacturing activity increased for the seventh straight month in December as factories brushed off the impact of the second national lockdown.
The IHS Markit/Cips manufacturing purchasing managers (PMI) index stood at 57.5 in December, with any score above the 50 mark indicating growth.
The figure, a 37-month high, beat economists’ forecasts of a reading of 57.3 for the final month of 2020.
The latest reading marked a considerable improvement from November, when the index stood at 55.6.
But analysts warned that the increase was likely to reverse over the coming months as the coronavirus continues to drag down the economy.
Rob Dobson, director at IHS Markit, said: “The Manufacturing PMI rose to its highest level in over three years in December, mainly reflecting a boost from last-minute preparations before the end of the Brexit transition period.
“Customers, especially those based in the EU, brought forward purchases, boosting sales temporarily. It seems likely that this boost will reverse in the opening months of 2021, making for a weak start to the year.
“Note also that the December PMI data were collected prior to the border closures, which will have led to further logistics and production disruptions for many companies.”
Although a potentially crippling no deal Brexit has been avoided, manufacturers spent much of December building up stocks of spare parts to stave off the risk of mass border disruption under the new customs regime.
However, such was the rush to stockpile spare parts that the UK’s ports swiftly became overwhelmed by the volume of traffic.
This was later compounded by the decision to stop cross-border traffic due to the surge of a new variant of the coronavirus disease.
Dobson added: “Worryingly, the manufacturing sector was already
beset by near-record supply-chain delays even prior to the closure of Dover-Calais shipping.
“Manufacturers reported freight delays – especially at ports – plus shortages of certain raw materials and a lack of supplier capacity.
“Vendor lead times, a bellwether of supply-chain pressures, lengthened in December to a similar extent to during the first wave of the pandemic.”
Manufacturing also grew across the Eurozone, with factory growth averaging a reading of 55.2.
Germany led the way with a reading of 58.3, its highest score for 34 months.