UK PMI services dropped to 48.9 in March, down from 51.3 and missed expectation of 51.3. That’s the first contraction reading since July 2016. Markit noted slight reduction in service sector activity. New orders fall for the third month running in March. And, prices charged increase at the slowest pace since June 2017. All sector PMI dropped to 50.0, down from 51.4.
Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:
“A drop in service sector activity indicates that UK GDP contracted in March, with the economy stalling over the first quarter as a whole and at risk of sliding into a deepening downturn in coming months. Both the services and construction sectors are now in decline and manufacturing is only expanding because of emergency stockpiling ahead of Brexit.
“The underlying picture of demand is even worse than the headline numbers suggest. Service sector order books have contracted at the steepest rate since the height of the global financial crisis in 2009 so far this year, with companies reporting that Brexit uncertainty has dampened demand and led to cancelled or deferred spending, exacerbating a headwind from slower global economic growth.
“A stalling of the economy in the first quarter will therefore likely turn into a downturn in the second quarter unless demand revives suddenly which, given the recent escalation of Brexit uncertainty, seems highly improbable. Such a scenario leaves the current consensus forecast for the UK economy to grow 1.3% in 2019 looking far too optimistic. IHS Markit currently expects to see just 0.8% growth in 2019, and even this modest performance is perhaps somewhat hopeful given the recent lack of any Brexit developments.”
