UK manufacturing improves, US and Eurozone falls

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UK: 

Business conditions in the UK manufacturing industry improved during the last month of 2018. 

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The IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose to a six-month high of 54.2 in December, up from 53.6 in November. 

This rise was mainly driven by stronger inflows of new business and an increase in stocks of purchases. Output also improved, but at a slower pace than November. 

Growth of new orders accelerated to a ten-month high this month, and inflows of new work strengthened from both domestic and export markets, with the latter profiting from improved demand from the USA, Europe, China, India, Brazil and Africa.  

Manufacturers linked these improvements to clients purchasing to build up safety stocks to mitigate possible Brexit disruption.  

Uncertainty around the potential impact of Brexit also influenced manufacturer’s purchasing activity, stock levels and business confidence throughout December. 

Input buying volumes increased as firms implemented plans to decrease potential supply-chain disruption, with input inventories rising at the fourth-fastest rate in the 27-year survey history.  

The input cost inflation eased to a two-and-a-half year low in December, and where an increase was stated, this was linked to the weak sterling exchange rate, Brexit and general commodity price rises. 

Output charge inflation hit a three-month high, showing the pass-through of higher input costs to clients.  

While manufacturers maintained a positive outlook for output over the next 12-months, the degree of confidence was only slightly above November’s 27-month low. 

US: 

The health of the US manufacturing sector improved this month, although it was at a slower pace.  

December’s PMI fell to a 15-month low of 53.8, down from 55.3 in November and follows a weaker rise in new business and the joint-softest expansion in output since September 2017. 

Production growth remained strong in December, and at a rate that matched that seen in November. The rise in output was linked to greater new order volumes. 

However, the upturn and pace of expansion was the joint-weakest in 15 months. 

While some firms said that the upturn was driven by new order inflows from new clients, others cited concerns around a fall in client demand.  

New export business grew at a faster pace in December, with new orders from abroad increasing for the fifth successive month and at the fastest rate since January.  

Rates of both input price and output charge inflation eased in December.  

Greater cost burdens were reportedly due to raw material stockpiling among manufacturers, shortages of electronics components and the ongoing impact of tariffs. Although the rate of inflation fell to an 11-month low. 

Eurozone: 

The slowdown of growth in the Euro area’s manufacturing economy seen throughout the majority of 2018 carried on until the end of the year.  

From this, the PMI recorded a final reading of 51.4, unchanged from the estimate, but down from 51.8 in November. This was the lowest reading seen since February 2016. 

While growth in the consumer goods sector improved, there was a decline of operational conditions for intermediate goods producers.  

It was the Eurozone’s ‘big-four’ economies that posted the lowest manufacturing PMI readings in December.  

Italy’s PMI data registered a two-month high of 49.1, but remained in contraction territory below 50, while France’s PMI showed the first decline in operating conditions in 27 months with 49.7.   

Germany (51.5) and Spain’s (51.1) manufacturing growth was modest, easing in each case to the weakest in around two-and-a-half years.  

The Netherland’s rate of expansion improved to its best in three months (57.2). 

Underlying the slowdown in overall growth was further softness in new orders, as for the third successive month, total new work placed with Eurozone manufacturers fell and the contraction was the greatest in over four years.  

December’s survey saw a net fall in export trade, led by the sharpest decline in six years in Germany.  

However, Eurozone manufacturers were able to find ways to get further growth of output. A modest increase in production combined with a fall in new order flows, meant that firms were able to make inroad to any work that remained outstanding.   

Input cost inflation was down, easing back to its lowest level for 17 months, with reports of reduced prices for oil-based items, with rising costs for metals.  

The rate of output charge inflation continued to soften and was the weakest rate since July 2017.  

China:  

China’s PMI for December was 49.4, a decrease of 0.6 from last month. 

The main raw materials inventory index was 47.1, down 0.3 from November, and lower than the 50 threshold that is the point between growth and contraction.

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