Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Service sector business activity stabilises as COVID-19
lockdown measures ease, manufacturers enjoy temporary boost from
pre-Brexit stockpiling
Vaccine roll-out buoys optimism, eases job losses
The UK economy returned to growth in December after the
lockdown-driven downturn seen in November, according to preliminary
PMI data covering manufacturing and services, adding to signs that
the hit to the economy from the second wave of COVID-19 infections
has so far been far less harsh than the first wave in the
spring.
PMI back in expansion territory
At 50.7 in December, the seasonally adjusted IHS Markit/CIPS
Flash UK Composite PMI - based on approximately 85% of usual
monthly replies - was up from 49.0 in November and back above the
crucial 50.0 no-change mark to indicate a very modest renewed
expansion.
The improvement in the PMI coincided with an easing of some
COVID-19 containment measures compared to November, which had seen
a national lockdown. In December, a new tiered system of
containment measures was introduced to better target local
outbreaks, which collectively represented a modest easing of
national restrictions.
The recovery lacked vigour, however, as the service sector
remained under particular strain, contracting marginally again as
ongoing social distancing measures due to the new tiered lockdowns
continued to hit many parts of the economy. Services activity has
now fallen for two months as the new lockdowns have hit, following
four months of expansion. Consumer-facing services, notably hotels,
restaurants and tourism, reported further marked declines in output
during December, largely offsetting renewed growth in business
services, transportation and manufacturing.
Manufacturing output rose for a seventh successive month, albeit
with the rate of increase slipping to the lowest since June.
The manufacturing and transport sector improvements were linked
to reviving global trade and a short-term boost from Brexit-related
stockpiling, which reportedly buoyed order books and exports during
the month. Around 20% of manufacturers, for example, reported that
activity had increased during the month due to Brexit and related
stockpiling.
UK supply chain delays among highest ever
recorded
On the other hand, Brexit stockpiling appears to have
exacerbated existing global supply chain delays, constraining
output at some manufacturing firms. Around 45% of the survey panel
reported longer wait times from suppliers, while only 2% saw an
improvement. The resulting lengthening of lead times in December
was the third-steepest since the survey began in 1992, exceeded
only by those seen amid COVID-19 shutdowns in April and May.
Shortages of critical inputs, alongside pressure on capacity
following forward-purchasing by clients ahead of Brexit, meanwhile
contributed to the sharpest rise in backlogs of work across the
manufacturing sector since May 2010.
Job losses moderate
While job losses continued to be reported during the month, it
was encouraging to see the rate of job cutting ease to the lowest
since the start of the pandemic. Business optimism about the year
ahead also remained buoyant, reflecting the light at the end of the
tunnel created by the roll-out of the COVID-19 vaccines. Optimism
waned slightly compared to November, however, largely due to rising
concerns over a no-deal Brexit.
Chris Williamson, Chief Business Economist, IHS
Markit
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
