United Kingdom: November services and manufacturing PMIs suggest weak momentum
December 4, 2019
The IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) decreased from 50.0 in October to 49.3 in November, below the threshold that separates expansion from contraction in activity. It should be noted that the services PMI does not cover certain sub-sectors such as retail, education and health, meaning the PMI does not reflect the services sector in its entirety—this likely explains in part why the service sector has continued to expand moderately according to GDP data, despite recent depressed PMI readings.
In November, new orders and demand from export markets declined, although employment stabilized. Input price inflation eased further, while output price inflation was soft amid intense competition.
The IHS Markit/CIPS manufacturing PMI ticked down from 49.6 in October to 48.9 in November, moving further below the 50-threshold that separates expansion from contraction. Output, new orders and employment continued to fall, while export orders also dropped—following a front-loading of purchases by foreign clients in October ahead of a potential no-deal Brexit. The extension to the Brexit deadline led firms to destock, while, on the price front, input prices dipped and output price inflation was moderate.
Taken together, the PMIs for October and November suggest tepid economic activity in Q4, due in part to the dampening effect of political uncertainty.
However, Duncan Brock, group director at the Chartered Institute of Procurement & Supply, highlighted a positive aspect of the latest data: "A chink of light emerged amongst the services gloom as optimism for the future was the brightest since July 2019. With the advent of the New Year, firms were in a more hopeful mood that the trading landscape had to improve in 2020."
Author: Oliver Reynolds, Economist