United Kingdom: The services and manufacturing sectors slow in October
November 5, 2018
Growth in the UK services sector lost some steam in October, with the IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) dipping to 52.2 from 53.9 in September. However, the indicator remained above the 50-point threshold that separates expansion from contraction.
The dip in October was driven by a slower expansion in new orders, which fed through to soft employment growth. In addition, firms reported hiring difficulties, which likely further constrained employment growth and led to higher wages—which in turn drove input price inflation in the month. Business sentiment declined to an over two-year low in October, in part on Brexit-related disruptions.
The IHS Markit/CIPS manufacturing PMI decreased notably from a revised 53.6 in September (previously reported: 53.8) to 51.1 in October. However, the index remained above the 50-point threshold that separates expansion from contraction in activity in the manufacturing sector, where it has been since August 2016.
October’s decline was due to slower growth in output, and the first declines in new orders and employment since 2016. Lower employment was driven by lower staff levels at large companies, as staff levels at SMEs continued to increase. Input price inflation was elevated on higher raw material costs, despite dipping to an over two-year low.
According to Chris Williamson, Chief Business Economist at IHS Markit: “The disappointing service sector numbers bring mounting evidence that Brexit worries are taking an increasing toll on the economy. Combined with the manufacturing and construction surveys, the October services PMI points to the economy growing at a quarterly rate of just 0.2%”.
UK Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists see fixed investment growing 2.0% in 2019 and 2.5% in 2020.
Author: Oliver Reynolds, Economist