UK Private Sector Recovers In December

The UK private sector output recovered in December driven by another solid increase in the manufacturing sector, flash survey data from IHS Markit showed Wednesday.

The IHS Markit/Chartered Institute of Procurement & Supply composite output index rose to 50.7 in December from 49.0 in November.

A score above 50 indicates expansion. But this was below economists' forecast of 51.3.

The service sector almost stagnated due to the ongoing Covid-19 restrictions on hospitality, leisure and travel businesses, while the manufacturing sector growth was driven by stockbuilding ahead of the Brexit deadline.

The services Purchasing Managers' Index improved to 49.9 from 47.6 in the previous month. This was also weaker than the expected score of 50.5.

The manufacturing PMI came in at 57.3 versus 55.6 in November. Economists had forecast the reading to rise marginally to 55.9.

The survey showed that shortages of critical inputs, alongside pressure on capacity following forward-purchasing by clients ahead of Brexit, contributed to the sharpest rise in backlogs of work across the manufacturing sector since May 2010.

Further, there was an increase in wait times from suppliers and the lengthening of lead times was the third-steepest since the survey began in 1992.

The survey showed that overall new business volumes stagnated across the private sector as a whole in December. A robust and accelerated rise in input prices added to pressure on UK private sector firms.

On a more positive note, there were signs of stabilization in employment numbers after the steep cuts seen since the start of the pandemic.

Meanwhile, business optimism about the year-ahead outlook eased only slightly since November. Confidence was mostly attributed to favorable news about vaccine roll-outs and hopes of a return to more normal trading conditions.

As Covid worries and no-deal uncertainty remains, firms will continue to face the most challenging business conditions in a generation for the next few months," Duncan Brock, group director at CIPS, said.