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The UK manufacturing sector activity improved more-than-expected in the month of December, 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 57.5 in December versus 57.3 expected and 57.3 first readout.

Key points              

UK Manufacturing PMI hits a 37-month high in December.

Near-record increases in input stocks and purchasing activity.

Strong demand and transport issues stretch supply chains.

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

“The Manufacturing PMI rose to its highest level in over three years in December, mainly reflecting a boost from last-minute preparations before the end of the Brexit transition period. Customers, especially those based in the EU, brought forward purchases, boosting sales temporarily. It seems likely that this boost will reverse in the opening months of 2021, making for a weak start to the year. Note also that the December PMI data were collected prior to the border closures, which will have led to further logistics and production disruptions for many companies.”

“Worryingly, the manufacturing sector was already beset by near-record supply-chain delays even prior to the closure of Dover-Calais shipping. Manufacturers reported freight delays – especially at ports – plus shortages of certain raw materials and a lack of supplier capacity. Vendor lead times, a bellwether of supply-chain pressures, lengthened in December to a similar extent to during the first wave of the pandemic.”

GBP/USD reaction

The GBP bulls were unimpressed by the upbeat UK Final Manufacturing PMI, as GBP/USD kept its range below 32-month highs of 1.3703.

The spot was last seen trading at 1.3680, modestly flat on the day.