UK private sector output edges up in December

According to the report from IHS Markit / CIPS, December data highlighted a marginal expansion of UK private sector output, driven by another solid increase in manufacturing production. In contrast, overall levels of service sector activity stagnated at the end of 2020, largely due to ongoing coronavirus disease 2019 (COVID-19) restrictions on hospitality, leisure and travel businesses.

The latest survey also indicated severe pressure on manufacturing supply chains, which was overwhelmingly linked to freight delays following congestion at UK ports. Around 45% of the survey panel reported longer wait times from suppliers, while only 2% saw an improvement. The lengthening of lead times in December was the third-steepest since the survey began in 1992, exceeded only by those seen amid COVID-19 shutdowns in April and May. Shortages of critical inputs, alongside pressure on capacity following forward-purchasing by clients ahead of Brexit, contributed to the sharpest rise in backlogs of work across the manufacturing sector since May 2010.

At 50.7 in December, the seasonally adjusted Flash UK Composite Output Index – which is based on approximately 85% of usual monthly replies – was up from 49.0 in November and back above the crucial 50.0 no-change mark. However, the latest reading signalled only a slight rise in private sector output and the rate of growth was slower than seen from July to October 2020. A relatively subdued service sector performance (49.9) continued to hold back the recovery, while manufacturing production was firmly in growth territory (55.3).