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UK manufacturing 'took a turn for the worse' in December

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Prime minister Boris Johnson during a visit to Ebac, an electrical appliances manufacturer in Newton Aycliffe, north-east England on 20 November 2019. Photo: Frank Augstein/Pool/AFP via Getty Images

Worse-than-expected survey data published Thursday pointed to a continued slowdown in Britain’s manufacturing sector.

A closely-watched survey by IHS Markit found the UK manufacturing sector continued to shrink in December. IHS Markit’s purchasing managers’ index (PMI) registered at 47.5 in December, below economists’s estimates of 47.6.

PMIs are an indicator of private sector activity and are given on a scale of 1 to 100. Anything above 50 signals growth, while anything below means contraction.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, which helped compile the survey, said the results for December “will set alarm bells ringing.”

Manufacturing output fell at its fastest rate since July 2012 in December and jobs were lost in the sector for the ninth month in a row.

Brock blamed Brexit uncertainty and the slowing global economy for the continued weakness in UK manufacturing.

“In the closing stages of the year the sector has ended on a dreary note,” Brock said. “Though the result of the General Election will bring some clarity to businesses, it still feels like a long road ahead for manufacturing to recover its losses from this year and there will still be some obstacles to overcome in 2020.”

Rob Dobson, director at IHS Markit, said: “The UK manufacturing sector took a turn for the worse at the end of 2019. Output fell at the quickest pace in seven-and-a-half years as new order inflows decreased and Brexit safety stocks were reduced.”

IHS Markit PMIs for manufacturing sectors across Europe, published earlier on Thursday, pointed to broad-based weakness for the sector. Manufacturing contracted across the eurozone, with only France able to register positive growth.

Samuel Tombs, chief UK economist at research consultancy Pantheon Macroeconomics, noted that the UK’s manufacturing slowdown was slightly better than the wide eurozone issues. Tombs said he expected the sector to “stabilise” in the first quarter of 2020.

Earlier on Thursday, a private sector survey published by the British Chamber of Commerce said the UK economy continued to stagnate in the fourth quarter of 2019.