Brexit Fears Lead to Record UK Stockpiling

-edited

UK businesses are stockpiling everything from auto parts to Ben & Jerry's ice cream due to Brexit fears.

Nonstop fearmongering by Remainers is behind Record High Stockpiling in the UK.

There has been increasing anecdotal evidence that companies are creating buffers as the March 29 Brexit deadline draws closer. On Thursday Unilever said it had hired special refrigeration units to stockpile Magnums and Ben & Jerry’s ice cream.

But the efforts now appears to have become more widespread as companies worry about the disruption to their supply chains.

In January inventories grew at the fastest rate in 27 years of surveys, according to the Purchasing Managers Index, compiled by IHS Markit.

Economists and trade experts have, however, warned that there is only so much that many businesses can do. At the World Economic Forun in Davos last month, Mark Carney, the governor of the Bank of England, said there was only a “limited amount” that businesses could do to prepare for a hard Brexit as manufacturing companies “can’t stack things all over Wales” to ensure they have the parts needed to overcome any supply disruption.

Samuel Tombs of Pantheon MacroEconomics said: “Contingency planning for a no-deal Brexit is providing only limited support to manufacturers at a time of weakening underlying demand, both in the domestic and export markets.”

While the UK’s figures might have been better that those for the eurozone, which fell for the third consecutive month, this was also only a result of Brexit preparations, he added.

UK Manufacturing PMI

Let's tune into the IHS Markit UK Manufacturing PMI report which the Telegraph did not bother linking to.

Key Findings

  • UK Manufacturing PMI at 52.8 in January (3-month low)
  • Stocks of purchases rise at survey-record rate
  • Employment falls for only the second time in past 30 months

Comments by Rob Dobson, Director at IHS Markit

  1. "The start of 2019 saw UK manufacturers continue their preparations for Brexit. Stocks of inputs increased at the sharpest pace in the 27-year history, as buying activity was stepped up to mitigate against potential supply-chain disruptions in coming months. There were also signs that inventories of finished goods were being bolstered to ensure warehouses are well stocked to meet ongoing contractual obligations."
  2. "Despite the temporary boost provided by clients’ pre-purchases and efforts to build-up stocks, the underlying trends in output and new orders remained lacklustre at best. Growth of new order inflows slowed sharply, and new export orders were near-stagnant, contributing to the weakest trend in output since the month following the EU referendum (July 2016). Based on its historical relationship against official data, the January survey is consistent with a further solid contraction of production volumes, meaning manufacturing will likely act as a drag on the economy in the first quarter."
  3. "Without a strong upturn in new orders and underlying growth there may be further hesitation to hire next month and with a general slowdown in the global economy and the Eurozone, we’re likely to continue to see significant challenges ahead."

Mish Comments

The UK is still expanding but much of that is due to artificial stockpiling.

Unless new orders pick up, this inventory may sit for a while. Auto parts are one thing, but storing huge supplies of ice cream shows just how irrational these fear are.

Can't they get Ben & Jerry's from the US?

A WTO-Brexit is still close to 50-50. An extension is likely, but no later than July.

Why July? That's when the next European Parliament meets and the last thing the EU wants is a pack of UK Brexit supports making a fuss of things.

Even if some stockpiling is warranted (I suspect most of it isn't) there's likely another 3-4 months in which to do so.

That assumes, that even in the case of WTO-Brexit there will not be the alleged "crash", but rather a negotiated delay to tie up some critical trade loose ends.

At best, stockpiling is three months premature.

Irrational Fears of WTO-Brexit

It is in the best interest of both the UK and the EU to make the alleged "hard Brexit", as smooth as possible, and either that will happen, or Theresa May will have her preposterous deal approved.

Recession Baked in the Cake

Meanwhile both the UK and the EU are headed for recession. It's now baked in the cake.

Italy is already in Recession with very troubled banks. Italy is Too Big to Bail, Too Big to Jail.

And as Italy heads for a second lost decade, the Entire Eurozone is on the Verge of Contraction.

China has slowed, the US is slowing, and all of Europe will soon be in recession, no matter what happens with Brexit.

The US will not be immune to these global pressures.

Mike "Mish" Shedlock

Comments (5)
No. 1-5
abend237-04
abend237-04

Wow! UK politicians have invented a way to produce icy Ben & Jerry's ice cream. What won't they think of next? I'll bet not one in a hundred of the political class allowing this to overrun UK manufacturers ever had to deal with managing the pig-through-the-python ordeal now upon their working middle class people. In the short run, every product line's bean counters will be crowing about their sudden, brilliant product cost positive cost variances. In the end, some manager(s) will be approaching Suzy and Joe on the line somewhere and telling them there're being sent home with no job. There will be no politicians present in those meetings to help the manager explain. Disgusting.

caradoc-again
caradoc-again

Most of the stockpiling is IMPORTS from EU.

Isn't this demand brought forwards and flatters the EU recent numbers?

If so, EU slowdown will be pronounced after stockpile until the inventory is rundown and some other run rate is reached.

How much of this is German manufactured goods?

wootendw
wootendw

"A WTO-Brexit is still close to 50-50. An extension is likely, but no later than July"

An extension was unlikely until 'hardline' Brexiteer Rees-Mogg capitulated just as his party had pulled ahead of Labour in polls.

2banana
2banana

But...but...but...

Bazookas.

"Mario Draghi: ECB bond-buying bazooka 'ready'

The European Central Bank stands ready to launch its bond buying "bazooka" to help ease borrowing costs in crisis-hit countries, president Mario Draghi said on Thursday."

caradoc-again
caradoc-again

Hasn't this already created a large number of zombie corporations or will they buy just Gov bonds next time? I cant vet my head around it. Anyone able to explain the consequences?