Manufacturers stockpiling at near record levels for Brexit finds latest PMI

stockpiling
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The latest IHS Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI), published today, has found that December 2018 saw near record levels of stock being held by UK manufacturers preparing for Brexit. Anna Tobin reports

In December 2018, the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to 54.2,  a six-month high, up from 53.6 the previous month.

The rise in the December PMI level was a result of stronger inflows of new business and a rise in stockpiling to mitigate potential Brexit disruption to supply chains. Input inventories rose to the fourth-fastest rate in the 27-year history of the survey. The weak pound also contributed to new export order wins.

“December saw the UK PMI rise to a six-month high, following short-term boosts to inventory holdings and inflows of new business as companies stepped up their preparations for a potentially disruptive Brexit,” said Rob Dobson, IHS Markit director.

“December saw the UK PMI rise to a six-month high, following short-term boosts to inventory holdings and inflows of new business as companies stepped up their preparations for a potentially disruptive Brexit. Stocks of purchases and finished goods both rose at near survey-record rates, while stock-piling by customers at home and abroad took new orders growth to a ten-month high. Any positive impact on the PMI is likely to be short-lived, however, as any gains in the near-term are reversed later in 2019 when safety stocks are eroded or become obsolete.

“The trend in production volumes remained lacklustre despite the safety stock-building, with the latest survey consistent with a mild decrease in the official measure of manufacturing output over the final quarter. Uncertainties regarding Brexit disruption on supply chains and the exchange rate are also weighing on business confidence. Although manufacturers forecast growth over the coming year, confidence remains at a low ebb. Manufacturing will, therefore, be entering 2019 on a less than ideal footing with Brexit uncertainty having intensified considerably.

“Stocks of purchases and finished goods both rose at near survey-record rates, while stockpiling by customers at home and abroad took new orders growth to a ten-month high. Any positive impact on the PMI is likely to be short-lived, however, as any gains in the near-term are reversed later in 2019 when safety stocks are eroded or become obsolete.

“The trend in production volumes remained lacklustre despite the safety stock-building, with the latest survey consistent with a mild decrease in the official measure of manufacturing output over the final quarter. Uncertainties regarding Brexit disruption on supply chains and the exchange rate are also weighing on business confidence. Although manufacturers forecast growth over the coming year, confidence remains at a low ebb. Manufacturing will, therefore, be entering 2019 on a less than ideal footing with Brexit uncertainty having intensified considerably.”

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