(Greenwich Merchant Bank): After four consecutive months of expansion, the IHS Markit/CIPS Flash UK Composite Output Index dipped from 52.1pts in October to 47.4pts in November 2020. The decline was largely due to the underwhelming performance of the Services sector, which logged a Composite Index of 45.8pts, from 51.4pts in the previous month, for the first time since June.
Furthermore, the downturn in the services sector can be attributed to the reduced activities in the hospitality business and other consumer-facing services being restricted to stem the spike in the second wave of COVID-19 cases.
Contrastingly, the Manufacturing PMI grew from 53.7pts recorded in October to 55.2pts in November. This growth resulted from increased production volumes, particularly in pre-production inventories, as the stocks of purchase component of the headline PMI reflected its deepest increase since October 2019, courtesy of the uncertainties surrounding Brexit as customers booked delivery of orders before the end of the transition phase on the 31st of December, 2020. While employment and new order sub-components were grim, the rise in purchasing activity led to prolonged supplier’s delivery time as shipping delays and clearing constrictions at the ports worsened.
Read also: Naira value crashes to new low, exchanges at N500/$1 at the parallel market
On the other hand, the IHS Markit Flash US Composite Index recorded the highest reading since March, as it printed 57.9pts in November 2020 from 56.3pts in the previous month. Both the Services sector and Manufacturing output led to this uptick as both posted respective growths of 57.7pts and 53.3pts in their sub-indices, chiefly due to sharp increases in new orders.
More so, the Manufacturing PMI increased by 56.7pts from 53.4pts in October 2020, especially with firmer expansions in new business and new export orders. The upbeat in these figures when compared to previous readings, depicts the improved clarity around the 2020 US Presidential elections and the high expectations on the effectiveness of the COVID-19 vaccine.
Furthermore, the IHS Flash Eurozone Manufacturing PMI fell from 54.8pts in October to 53.6pts in November 2020, however, the index remained above the 50-threshold. The decline came amid further lockdown measures introduced to curb the increase in COVID-19 cases. Thus, the Eurozone Composite Output Index contracted by 45.1pts from 50.0pts in the previous month. Germany, a major economy in the Eurozone bloc, posted a marginal PMI drop of 3.00pts to 52.0pts in November on the back of the drag in its Services sector. It is pertinent to note that for the first time since the beginning of the pandemic in February, employment rose in Germany while France reported a lower rate of job losses.
The impact of the pandemic remains steady as the Services sector of the UK and Eurozone have been grossly dampened by it. The demand for Consumer-facing and Hospitality services continues to be weakened particularly with the recent implementation of lockdown and restrictions protocols in these regions. Conversely, manufacturing activity appears to be gathering steam as pockets of expansion across all three corridors remains apparent.
However, with the new development on the COVID-19 vaccines, it is posited that activities across the Manufacturing and Services sectors will begin to experience trickles of upbeat momentum, as these economies might post improved readings in coming months, though capped by the risk of a renewed downturn, emanating from surging virus infections.
