RECORD stockpiling of goods and materials in the event of a “potentially disruptive Brexit ” drove the EY purchasing managers’ manufacturing index (PMI) to a 13-month high last month.
The spike came as manufacturers and their clients – including those abroad – tried to guarantee supplies, which lifted output, domestic and foreign orders and employment.
EY reported increased stockpiling across the consumer, capital and intermediate goods sectors.
But the surge in UK manufacturing activity contrasted sharply with a weak set of manufacturing PMIs for the Eurozone – which showed contracting activity for especially Germany, France and Italy as well as for the Eurozone overall.
The improved March PMI fuelled EY’s belief that UK gross domestic product (GDP) growth likely improved to 0.3% quarter-on-quarter in the first quarter – from 0.2% in the fourth quarter of 2018.
However, the company said the downside is that the manufacturing sector and the economy overall will ultimately take a hit when stock-building slows.
Manufacturers’ exports are being hampered by weakened global growth, particularly slower activity in the Eurozone, while global trade conflicts and tensions are also a concern.
“The purchasing managers’ survey pointed to the manufacturing sector getting a major lift in March from manufacturers looking to build up their supply of inputs and increase inventories of finished products amid heightened concerns of a potentially disruptive UK exit from the EU at the end of March,” said Howard Archer, chief economic advisor to the EY Item Club. “Specifically, the PMI spiked to a 13-month high of 55.1 in March after dipping to a four-month low of 52.1 in February from 52.6 and 54.3 in December. A level of 50 indicates unchanged activity.
“Consequently, the manufacturing PMI averaged 53.3 in the first quarter of 2019, which was up from the average of 52.9 seen in the fourth quarter of 2018. However, it was still clearly below the overall 2018 average of 53.9.”
Archer said manufacturers’ confidence improved modestly in March and added: “Despite, January’s increase, the underlying manufacturing performance continued to look weak with output down 1.1% year-on-year.”
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