MNI DATA: UK Dec Mfg PMI Strength A Product Of Stockpiling

--CIPS/IHS Markit UK Manufacturing PMI 54.2 in Dec vs 53.6 in Nov

By Jai Lakhani

     LONDON (MNI) - The UK CIPS/IHS Markit manufacturing sector PMI rose six

points to 54.2 in December, after November reversed the bulk of October's

decline. Despite this, the average PMI reading during the fourth quarter was the

weakest since Q3 2016, the first quarterly survey conducted after the EU

referendum.

     The PMI continues to signal weak manufacturing activity, with a rise in new

business and a solid increase in stock holdings to the second-highest level on

record in the survey -- a direct product of Brexit preparations. Output

increased at a slower pace than during November.

     "December saw the UK PMI rise to a six-month high, following short term

boosts to inventory holdings and inflow of new business as companies stepped up

their preparations for a potentially disruptive Brexit," said Rob Dobson,

Director at IHS Markit.

     Dobson also said that any positive impact from the reading is likely to be

"short-lived, however, as gains in the near-term are reversed in 2019 when

safety stocks are eroded or become obsolete."

     --RISE IN DOMESTIC AND FOREIGN DEMAND A FALSE DAWN IN LIGHT OF BREXIT

     The November improvement was driven primarily by stronger inflows of new

business and an increase in stocks -- both driven by the Brexit preparations of

both manufacturers and their clients.

     Slightly more encouraging was the fact that some reports suggested

successful promotional activity contributing to sales growth, as well as new

product launches. These were also boosted by the weak sterling exchange rate.

     --CONFIDENCE FRAGILE

     The latest survey provided a mixed picture regarding the outlook for the UK

manufacturing sector. Whilst the rate of increase was the second strongest since

the survey began in 1992, the overall degree of optimism was only slightly above

November's 27-month low, as "Brexit and exchange rate uncertainties" weighed on

firms' outlook for the year ahead.

     --INPUT COST INFLATION EASING

     Input cost inflation eased to a two-and-a-half year low in December.

Furthermore, where reports suggested an increase, this was primarily down to the

weak sterling exchange rate combined with Brexit uncertainty being priced into

goods and general commodity prices. The easing in input cost inflation was not

passed through into output charge inflation, which hit a three-month high.

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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