UK manufacturing surges ahead as transition period nears end
The UK manufacturing sector continued to strengthen in November, boosted by Brexit stockpiling and demand recovering following earlier lockdowns, industry data showed on Tuesday.
The IHS Markit CIPS purchasing managers’ index for November was 55.6, a 35-month high and an improvement on October’s reading of 53.7. The sixth consecutive month of growth, November's reading also beat forecasts and the flash estimate of 55.2.
The hike was primarily attributed to the transition period drawing to a close, as raw materials were stockpiled and European Union clients brought forward orders. The UK officially left the EU in January, and the transition period is scheduled to end at 2300 GMT on 31 December.
Output and new business also rose in November, but manufacturing job losses continued for the tenth month in a row. The weak employment data is largely attributed to the impact of Covid-19 on the sector.
Rob Dobson director at IHS Markit, said: "Growth of the UK manufacturing sector picked up in November, temporarily boosted by Brexit-buying among clients and the ongoing boost from economies re-opening following lockdowns earlier in the year.
"The effects were strongest felt among firms supplying inputs to other companies, as warehouses were restocked, and among producers of investment goods such as machinery and equipment.
"The weak point was the consumer goods industry, which saw lower output and new order intakes amid depressed household sentiment caused by mounting job losses and the UK re-entering lockdown."
Duncan Brock, group director at the Chartered Institute of Procurement and Supply, said: "Panic buying aside there was little in the figures to suggest a sustainable recovery once we move into 2021. Job shedding continued last month and new business could drop off a cliff in January, as potential border disruptions are thrown into the mix."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The sector’s recovery is not progressing as quickly as the PMI suggests. The PMI has been boosted by a jump in the stocks of purchases index and a decline in the suppliers’ delivery times index.
"Admittedly, it’s clear that the manufacturing sector has not been adversely affected by the second lockdown: the output index edged up to 56.7 from 55.8 in October, primarily reflecting a pick-up in overseas demand as EU firms are also seeking to stockpile goods in case of Brexit-related disruptions.
"But even if a trade deal is signed off at the last minute, manufacturing output will likely fall back in the first quarter due to the shift in the timing of export demand. The manufacturing output figures, therefore, probably will flatter to deceive in the fourth quarter, with output approaching its pre-Covid level before reversing those gains in the first quarter."
The IHS Markit survey was compiled between 12 and 25 November, with questionnaires sent to purchasing managers in a panel of around 600 manufacturers.