British manufacturing slows in December, however output and orders remain resilient

ACTIVITY in Britain’s manufacturing sector has eased from a near four-and-a-half-year high, but still stumped up “solid” output and order growth in December.

The closely watched Markit/ CIPS UK Manufacturing purchasing managers’ index (PMI) showed a reading of 56.3 last month, down from 58.2 in November, with economists expecting a figure of 57.9.

A reading above 50 indicates growth.

While output levels from consumer goods producers rolled back, intermediate and investment goods motored ahead thanks to rising demand from overseas.

UK producers enjoyed a healthy appetite from Europe, China, the Middle East and America, helping to drive a further rise in employment. It means the manufacturing industry churned out an average reading of 57 for the final three months of the year, its best performance since the second quarter of 2014.

Stephen Kelly (inset), managing director of industry group Manufacturing NI, said: “Firms are still reporting that they are busy, taking orders and employing more people. There are however some signs of slowing, particularly in building products and transport equipment.

“This likely reflects what’s happening in the wider UK economy which has seen confidence to make big investments slide as the government has yet to convince firms that the economy post-Brexit will be good for business.”

Rob Dobson, director at IHS Markit, said “Although growth of output and new orders moderated during December, rates of expansion remained comfortably above long-term trend rates.

“The sector has therefore broadly maintained its solid boost to broader economic expansion in the fourth quarter.

“The outlook is also reasonably bright, with over 50% of companies expecting production to be higher one year from now.

“The main growth engines were the intermediate and investment goods sectors during December, suggesting resilient business-to-business demand and capital spending trends, albeit in part due to rising exports.”

Firms were also given a helping hand after input costs rose at the slowest rate for four months.

Chemicals, electrical goods, metals and paper were among the products becoming more expensive.

Despite sterling’s Brexit-induced slump keeping costs high, around 54% of firms are pencilling in a rise in production for the year ahead. Samuel Tombs, Pantheon Macroeconomics chief UK economist, said the manufacturing industry will struggle to maintain momentum this year.