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Financial News: UK Manufacturing Stabilizes As Political Uncertainty Reced

UK Manufacturing Stabilizes As Political Uncertainty Recedes

02/03/2020 - 07:51:00 (RTTNews)

(RTTNews) - Britain's manufacturing sector stabilized at the start of the year, led by gain in new orders, employment and business confidence as the political uncertainty subsided after the general election.

The seasonally adjusted Purchasing Managers' Index, or PMI, for the manufacturing sector climbed to a nine-month high of 50.0 in January, which was slightly higher than the flash reading of 49.8, survey data from IHS Markit and the Chartered Institute of Procurement & Supply showed on Monday.

As score of 50 suggests the factory sector neither grew nor shrink. The last time the PMI climbed above 50 was in April 2019.

In December, the PMI reading was 47.5.

Output growth was driven by consumer and intermediate goods sectors, where production was boosted by increased demand.

Meanwhile, the downturn in the investment goods sector continued amid sharp declines in output and new work intakes.

Orders mainly came from the domestic market. New export orders continued to fall amid weak demand from with Europe. Employment was broadly unchanged after falling in the past nine months.

Business confidence climbed to an eight-month high and 47 percent manufactures forecast output growth for the year ahead. However, the optimism was relatively low partly due to the ongoing uncertainty surrounding the impact of Brexit.

"Improvements were mostly seen via rising consumer demand and renewed input buying by businesses, suggesting that the reduction in uncertainty following the election has encouraged households and businesses to step up spending," IHS Markit Director Rob Dobson said.

"In contrast, an ongoing downturn at investment goods producers suggests that the economic certainty required to achieve a full revival in capital spending may still be some way off, likely reflecting lingering uncertainty about the Brexit road-map in the coming year."

Inventories of purchases declined at the fastest pace since May 2013, thanks to a combination of reducing Brexit safety stocks, efforts to improve cash flow, intentional inventory depletion strategies and lower levels of purchasing.

Input buying volumes fell for the third successive month, while stocks of finished goods rose for the first time in three months.

Average input costs increased for the second month in a row, and at the fastest pace since last August, mainly due to market forces, exchange rate volatility, supplier price increase and rising energy and raw material costs. Output prices rose for the forty-fifth month in a row.

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