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UK PMI services dropped to 28-month low, sharp deterioration in service sector growth

UK PMI services dropped notably to 50.4, down from 52.2 and missed expectation of 52.5. That’s also the lowest reading in 28 months. Markit noted there is only marginal expansion of overall business activity. Employment growth moedrates to four-month low. And, business optimism is weakest since July 2016.

Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:

“A sharp deterioration in service sector growth leaves the economy flatlining in November as Brexit concerns intensified. Measured across services, manufacturing and construction, the survey results suggest that the pace of economic growth has stalled. With the exception of July 2016, when business slumped in the immediate aftermath of the EU referendum, November saw the worst performance since February 2013.

“The surveys are so far consistent with 0.1% GDP growth in the fourth quarter, thanks to the expansion seen back in October, but growth momentum has since been lost and risks are clearly tilted to the downside.

“A contraction of service sector business activity in November was only avoided by firms working through backorders to an extent not exceeded since 2009. As such, unless demand revives, a slide into economic decline at the turn of the year is a distinct possibility.

“Both the slowdown in current business activity and the deterioration in business optimism were primarily caused by an intensification of anxieties over Brexit. Uncertainty in relation to the withdrawal agreement and the possibility of no deal was often reported to have caused companies and customers to cancel or postpone spending and investment decisions. Clarity in relation to Brexit arrangements is therefore urgently needed to help ensure the current stalling of growth does not translate into a downturn.”

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