3. März 2021

UK: Manufacturing has a weak start to the year

PRESSEMITTEILUNG | UK: Manufacturing has a weak start to the year – Economics Flash.

01/04/15 | The UK manufacturing PMI fell to a 3-month low of 51.9 in December (consensus 52.8), down from 52.5 in the previous month. The current output sub-component fell 0.8pts to 54.1 and based on historical relationships this is consistent with basically zero growth in official manufacturing output. Moreover, there are few if any signs that things will improve in the near term. The new orders sub-component fell 1.5pts to 52.2 – a 15-month low – and the new export orders component fell 1.1pts to 51.0. The only ray of light was a rise in the employment sub-component to 51.2 from 50.0, which suggests UK manufacturers haven’t stopped hiring. With economic growth slowing and consumer credit growth rising fast, the risk to our forecast for the first BoE hike to come in May this year is that they delay further and try to use macroprudential policy as the first line of defence against risks to financial stability.

The weakness in UK manufacturing activity is explained by a number of headwinds facing UK manufacturers. First, sterling’s past appreciation is still weighing on the competitiveness of UK manufacturers. Second, external demand remains subdued, particularly in emerging markets. Earlier today, Caixin’s China manufacturing PMI surprisingly fell back to 48.2 in December from 48.6 in the prior month; and the new export orders sub-component fell sharply from 51.6 to 47.8, suggesting weak external demand.

These forces, along with the large fall in global commodity prices, means price pressures remain weak. The input prices index rose 2.2pts to 43.5, but this is still way below its historical average of 55.0. The output prices index rose 2.3pts to 49.5, but lies well-below its historical average of 52.9.

Economic activity in the UK has slowed modestly over the past year and has become increasingly dependent on services and household consumption. We expect this trend to continue over the next year. In a separate release today, the BoE reported that credit growth continues to firm, with consumer credit growth rising an eyebrow-raising 8.3% yoy in November. With economic growth slowing and consumer credit growth rising fast, the risk to our forecast for the first BoE hike to come in May this year is that they delay further and try to use macroprudential policy as the first line of defence against risks to financial stability.

Daniel Vernazza, Ph.D.
Lead UK Economist
UniCredit Research

Corporate & Investment Banking
UniCredit Bank AG, London Branch
Moor House
120 London Wall
UK-EC2Y 5ET London



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