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UK Factory Output Fell at Fastest Rate Since 2012

UK Factory Output Fell at Fastest Rate Since 2012

LONDON, U.K. – The numbers are out, and the manufacturing output in the U.K. for December significantly dropped.

The British factory output in December fell considerably, recording its fastest decline rate since 2012. According to a survey, which was showed on Thursday, cited a tepid global economy as the primary factor hurting the manufacturing demand and the businesses, further reducing the stocks of goods they had been building up in case that the Brexit deal will not come through.

In the IHS Markis/CIPS UK Manufacturing PMI (Purchasing Manager’s Index), the output gauge of the manufacturing sector dropped to 45.6 in December, considerably lower from November’s output, which was at 49.1. December’s rate is the lowest recorded output gauge since July 2012, along with a note that any value below 50 suggests a contraction.

The broader headline PMI that pools output gauges, both the orders and employment, also dropped for December. From November’s 48.9, it fell to 47.5, which only slightly revised from the 47.4 preliminary reading. The PMI marks a four-month low for U.K.

According to a survey compiler IHS Markit economist Rob Dobson, the weak demand and continued overall subdued confidence in the market, the input purchasing have dropped back significantly, and jobs were slashed for the ninth successive month.

Based on the economic growth of the country, with the official data published last month, the annual growth has slowed to 1.1% during the third quarter of the previous year, marking its lowest rate since 2010. The industrial output also dipped by 1.35 YoY.

Meanwhile, the survey published on Thursday was conducted within the period starting December 5 to December 18. It spans with the U.K. general election on December 12, which the majority won by Prime Minister Boris Johnson, which has given him enough votes to pursue his Brexit scheme.

The previous uncertainty regarding the Brexit has lowered business investments in the country most of 2019. The sentiments of a no-deal Brexit has increased the volatility of the output as companies seesawed in building up and reducing stocks of raw materials following deadline extensions.

On the other hand, Brexit uncertainties were mostly crushed as Britain looks on the way to leave the E.U. by the end of January 2020, with a transition agreement that will avoid any new tariffs within this year. The no-tariff deal until the end of 2020 will give Johnson a short but considerable window to further trade talks with the E.U. for the long-term.

Nonetheless, the new orders index in the PMI survey remained under 50 levels for growth, nearing its lowest level since seven years ago.

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