UK Final Manufacturing PMI beats estimates with 54.1 in Jan, GBP/USD unfazed

The UK manufacturing sector activity improved more-than-expected in the month of January, the final report from IHS Markit confirmed on Monday. 

The seasonally adjusted IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) was revised higher to 54.1 in January versus 52.9 expected and 52.9 first readout.

Despite the upward revision, the figure came in at a three-month low.

Key points              

Supply-chains stretched by Brexit and COVID restrictions.

Input cost and selling price inflation both accelerate.

Rob Dobson, Director at IHS Markit, commented on the survey

“Whereas many countries are seeing manufacturers provide a much-needed support to economic growth as the service sector is hit by COVID-19, the UK’s manufacturing sector has come close to stalling. A mixture of harsher COVID-19 restrictions and Brexit led to near-record supply-chain disruptions, lower exports and increased costs. The impact was felt most at consumer goods producers, who reported steep falls in output and new orders. There were also early signs that smaller companies were being hit harder by the tougher operating environment than medium- and larger-scale producers.”

"The hope is that the current constraints will start to ease once COVID-19 restrictions are lifted, vaccines are rolled out and ports, suppliers and manufacturers adapt to the new trading environment post-Brexit. If so, supply, demand and production bottlenecks should slowly work through the system and growth will not be knocked too far off course through 2021. However, there is no swift end in sight to these headwinds, and the longer the current circumstances remain the greater the potential damage to the sector and its suppliers.”

GBP/USD reaction

The GBP bulls were unimpressed by the upbeat UK Final Manufacturing PMI, as GBP/USD holds gains below 1.3750, having hit a daily high of 1.3758.

The spot was last seen trading at 1.3740, up 0.30% on the day.