Britain’s manufacturers start 2018 on the back foot as the sector’s Brexit-driven surge falters

source
Reuters/Phil Noble

  • UK manufacturing sector slows even further in January, starting 2018 on the back foot.
  • IHS Markit’s PMI survey for the sector came in at 55.3, below the forecast 56.5 reading.
  • January’s reading follows a similar disappointment in December.
  • Manufacturing has been a rare economic success story in the UK since the vote to leave the EU in June 2016, thanks to the weakness of the pound.

LONDON – Britain’s manufacturing sector endured a tough start to 2018, with growth in the sector slowing according to the latest PMI survey released by IHS Markit on Thursday.

January’s reading for the sector came in at 55.3. The previous month’s reading was 56.3, while growth in the month had been forecast by economists polled prior to the release to be 56.5.

The purchasing managers index (PMI) figures from IHS Markit are given as a number between 0 and 100. Anything above 50 signals growth, while anything below means a contraction in activity. So the higher the number is, the better things look for the UK.

“The UK manufacturing sector reported an unwelcome combination of slower growth and rising prices at the start of 2018,” Rob Dobson, a director at IHS Markit said in a statement released alongside the data.

“Though the PMI showed continued growth, it was the weakest since June as shortages in commodities and raw materials resulted in a scrabble to complete goods, suppliers disappointed with longer delivery times and costs were on the rise again,” Duncan Brock, Director of Customer Relationships at CIPS, which compiles the survey with IHS said.

Manufacturing has been a rare economic success story in the UK since the vote to leave the EU in June 2016, thanks to the weakness of the pound since the vote.

The slump in the pound since the vote has made most British goods cheaper for overseas buyers, boosting manufacturing businesses as a result. However, as the pound recovers, particularly against the dollar, that boost is likely to wane somewhat.

Here’s the chart showing the longer term trend:

Screen Shot 2018 02 01 at 09.34.16

source
IHS Markit

January’s figures, while disheartening after a strong 2017, were not all bad, with Dobson pointing out that: “Encouragingly, despite the slowdown, the latest survey is consistent with production rising at a solid quarterly rate of around 0.6% in January, with jobs also being added at a faster pace.”