Brexit stockpiling gives short-term boost to United Kingdom manufacturing

The manufacturing sector is hit by the double whammy of a new sales and service tax and lower ringgit. – EPA pic

The U.S. service sector signaled a solid expansion in business activity in December 2018, although experiencing the slowest growth for three-month, according to data released by the IHS Markit on Friday.

The country's Manufacturing Purchasing Managers' Index was 54.5 in December, down from 55.4 in November and the lowest level in nine months.

Latest data indicated that new work from overseas was broadly unchanged in December, which ended a 12 month period of sustained expansion.

Results of a Caixin survey on China's manufacturing in December indicated that factory activity contracted for the first time in 19 months amid a trade dispute with the US.

"Stocks of purchases and finished goods both rose at near survey-record rates, while stock-piling by customers at home and overseas took new orders growth to a 10-month high".

Manufacturers generally expect output growth to continue over 2019, with confidence linked to predictions of higher new orders and business expansion plans.

The latest numbers from British manufacturers are in stark contrast to numerous world's top economies, which posted a contraction last month. The flash reading for December was 53.6.

'It is likely that the recent slowdown is attributable to the impact of the uncertain economic outlook on buyer sentiment, given that it has occurred against a backdrop of solid employment growth, stronger wage growth and continued low borrowing costs, ' Chief Economist at Nationwide Robert Gardner said. This was highlighted by a drop in backlogs of work at service providers for the third month running, which is the longest period of decline since the summer of 2016.

Output charges also rose at the slowest pace since December 2017 as demand softened and input price growth moderated.

"December data signalled a loss of momentum for manufacturers at the end of the year, with stagnating export sales and softer energy sector demand the key factors behind an overall slowdown in production growth".

Britain's economy was on track for quarterly growth of around 0.1 percent during the fourth quarter, according to IHS Markit, well below the post-financial crisis average of 0.5 percent.

November and December marked the weakest two months for morale among services firms since March 2009, around the low point of Britain's last recession. This was the first reduction since February 2016.

Williamson also said that the inflationary forces in the United States cooled in December 2018 mainly as lower oil prices helped to alleviate upward cost pressures from tariffs.