UK factory PMI hits three-year high in December: IHS Markit

A worker at perforating company Bion uses a machine at the factory in Reading
FILE PHOTO: A worker at perforating company Bion uses a machine at the factory in Reading, Britain September 22, 2016. Picture taken September 22, 2016. REUTERS/Peter Nicholls/Files

January 4, 2021

LONDON (Reuters) – A closely watched gauge of growth in British manufacturing activity rose to its highest level in three years last month, as factories rushed to complete work before the end of the post-Brexit transition period on Dec. 31.

The IHS Markit/CIPS manufacturing Purchasing Managers’ Index (PMI) for December rose to 57.5 from November’s 55.6, its highest since November 2017 and slightly above an initial flash estimate of 57.3.

The most recent official data, for October, showed factory output was 7.1% lower than a year earlier, largely due to reduced demand in consumer-facing industries as a result of COVID-19 shutdowns.

IHS Markit director Rob Dobson said he did not think December’s surge in activity would last.

“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,” he said.

Prime Minister Boris Johnson reached an eleventh-hour deal with the European Union on Dec. 24, averting tariffs on goods trade with the EU. However, trade between the two economic areas will still face significant extra paperwork from Jan. 1.

The survey showed manufacturers stockpiled materials at the fastest rate since March 2019 – when there were also fears of disruption to trade with the EU – and that delivery times were the slowest since the initial lockdown in April and May.

Throughout December there were delays at British ports, culminating in a lengthy blockage at Dover just before Christmas after France shut the border following the identification in Britain of a new, more infectious, variant of the coronavirus.

The IHS Markit survey took place between Dec. 4 and Dec. 18, before the French action.

(Reporting by David Milliken; Editing by Hugh Lawson)