UK manufacturing PMI declines in December

The December Manufacturing PMI declined by 0.6 points to 51.9, as expected and against consensus' expectations, after a marginal downward revision to 52.5 in November.

On a quarterly basis, the Manufacturing PMI rose by 1.5pts in Q4 15 to an average of 53.3. This broadly supports the view that Q4 15 GDP growth will print at 0.5% q/q (from 0.4% q/q in Q3 15). However, in light of the small portion that manufacturing makes up in the UK economy, the focus will be on the December Services PMI released on Wednesday 6 January.

Furthermore, the difference can be noticed, in contrast with the two previous releases, that SME sentiment was now stronger than larger firms' sentiment. In particular, SMEs reported stronger new orders compared with larger firms. On new orders, it appears that export-driven orders continue to pick-up at the expense of domestic-driven orders, although according to the Markit press release, firms did report an easing in export orders growth compared with previous months.

"We remain cautious on manufacturing in light of a lack of broad-based continued improvement in sentiment", says Barclays.