IHS announces the fastest pace for contraction in the UK’s manufacturing activity in over 7 years

on Jan 2, 2020
Updated: Mar 11, 2020
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  • UK's manufacturing PMI dropped to 47.5 in December, as per Thursday's data.
  • The rate of contraction was highlighted as the fastest in over seven years.
  • UK's business sentiment improved slightly in December.
  • Employment in manufacturing sector dropped for the 9th consecutive month.
  • Forex market responded moderately to the economic data on Thursday.

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IHS Markit revealed the UK’s final manufacturing Purchasing Managers’ Index (PMI) for December on Thursday. The report highlighted the manufacturing activity in the UK to have continued contraction at a pace that was unseen since July 2012.

Brexit uncertainty had weighed heavily on the UK’s economy at large. With domestic and overseas clients increasingly reluctant in taking on new labor, production and overall output volumes were reported to have further dropped in December.

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UK’s Final PMI Dropped To 47.5 In December

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The manufacturing PMI for the United Kingdom dropped to 47.5 in December that marks the second-worst figure noted in over 7 years. The lowest in this time period was printed in August at 47.4. Analysts had expected a slightly higher 47.6 for UK’s manufacturing PMI in the month of December. A figure below the 50 mark represents contraction in the manufacturing activity.

The economic data also showed both the intermediate and investment goods sectors to have recorded contraction. The consumer goods sector, on the contrary, hinted at a slight expansion. While the decline in new work was posted as the steepest in the previous eight months, in the new business segment, the noted decline was unparalleled in the past seven years.

The new export business also extended its drop for the second month in a row. As per the analysts, the political complications, economic uncertainty, and the global slowdown were among the macro factors to have contributed to the UK ending 2019 with manufacturing activity that lied in the red zone.

On the other hand, however, the report announced the business sentiment at large to have improved in the United Kingdom in December. As many as 43% of the businesses expressed confidence that the output would be significantly better in the next year. Only 10% were pessimistic about 2020’s outlook.

Employment In Manufacturing Sector Dropped For 9th Consecutive Month

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Employment in the manufacturing sector was also reported to have dropped for the 9th month in a row. The pace, however, was highlighted as the slowest since August.

The forex market didn’t respond too aggressively to the economic data on Thursday with the GBP/USD pair having fallen slightly from 1.3225 to 1.3210. The pair recorded a new high yesterday at around 1.3285. The psychological strong resistance is currently located for the pair at 1.3300. Breaking above the psychological resistance is likely to open the way for the currency pair back to 1.3500 level that was last seen following the Conservative Party’s victory in the UK’s general election on December 12th.

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