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United Kingdom PMI August 2019

United Kingdom: Services and manufacturing PMIs sink in August

The IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) decreased to 50.6 in August from 51.4 in July. As a result, the indicator was only just above the 50-threshold that separates expansion from contraction in the services sector. It should be noted that the services PMI does not cover certain subsectors such as retail, education and health, meaning the PMI may not completely reflect the sector.

August’s rise came on slower employment and new orders growth and flatlining new export orders, amid elevated political uncertainty. Input cost inflation accelerated, spurred by higher wages and utility bills, although output price inflation was soft due to intense competition.

According to Chris Williamson, Chief Business Economist at IHS Markit: “So far this year the services economy has reported its worst performance since 2008, with worrying weakness seen across sectors such as transport, financial services, hotels and restaurants, and business-to-business services.”

The IHS Markit/CIPS manufacturing PMI declined to 47.4 in August from 48.0 in July, the lowest reading in over seven years. Output, new orders, new exports and employment slumped, while business sentiment sank to a series-record low due to Brexit fears and waning global economic activity. Input cost inflation was notable, underpinned by the weak sterling, and feeding through to higher output prices.

Regarding export orders, Rob Dobson, Director at IHS Markit, comments: “The global economic slowdown was the main factor weighing on new work received from Europe, the USA and Asia. There was also a further impact from some EU-based clients routing supply chains away from the UK due to Brexit.”

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