United Kingdom: Flash PMI data shows record deterioration in business activity in March; worse is still to come
March 24, 2020
The IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) fell from 53.2 in February to 35.7 in March, moving below the threshold that separates expansion from contraction in activity. The manufacturing PMI was down from 51.7 to 48.0. Taken together, the PMIs show the largest decline in activity since comparable records began over 20 years ago.
The service sector suffered particularly badly in March due to coronavirus fears keeping consumers from spending, and government measures aimed at containing the virus. Moreover, the manufacturing PMI reading was flattered by longer delivery times. In normal circumstances, longer delivery times are indicative of strong demand, and hence contribute positively to the PMI. However, in March longer delivery times were driven by coronavirus-induced supply chain issues.
Chris Williamson, chief business economist at IHS Markit, commented:
“The surveys highlight how the Covid-19 outbreak has already dealt the UK economy an initial blow even greater than that seen at the height of the global financial crisis. With additional measures to contain the spread of the virus set to further paralyse large parts of the economy in coming months, such as business closures and potential lockdowns, a recession of a scale we have not seen in modern history is looking increasingly likely.”
Author: Oliver Reynolds, Economist