UK economy headed for recession after services shrink unexpectedly - PMI

By David Milliken

 

FILE PHOTO: The Canary Wharf financial district stands in London, Britain August 11, 2019. REUTERS/Simon Dawson/File Photo

 

LONDON (Reuters) - Britain’s economy appears to have tipped into recession as firms brace for the risk of a disruptive Brexit in just a few weeks’ time, according to a survey which showed the dominant services sector took an unexpectedly sharp downturn last month.

 

Prime Minister Boris Johnson has promised to take Britain out of the European Union by Oct. 31 come what may, despite parliament passing a law ordering him to secure a new transition deal to soften the economic blow.

 

Against this backdrop, September’s IHS Markit/CIPS services Purchasing Managers’ Index (PMI) fell by more than any economist predicted in a Reuters poll, tumbling to a six-month low of 49.5, below the 50 level that divides growth from contraction.

 

Combined with even weaker manufacturing and construction surveys earlier in the week, September’s all-sector PMI sank to 48.8 from 49.7, its lowest since the month after the referendum decision to leave the EU in June 2016, and before that 2009.

 

IHS Markit said the figures suggested Britain’s economy shrank by 0.1% in the three months to September.

 

“Coming on the heels of a decline in the second quarter, (this) would mean the UK is facing a heightened risk of recession,” IHS Markit economist Chris Williamson said.

 

Britain’s economy shrank by 0.2% in the three months to June - the first decline since 2012 - and a second quarterly contraction would meet the recession definition used in Europe.

 

On Wednesday, Johnson sent new Brexit proposals to the EU and said that unless the bloc compromised, Britain would leave without a deal at the end of this month.

 

Leaving the EU without a deal risks causing major disruption to trade, at least in the short term, due to the immediate imposition of new tariffs and regulatory checks at ports.

 

Britain’s economy is also slowing due to the trade conflict between the United States and China.

 

“INSIDIOUS WEAKENING”

 

The PMI data are not a fail-safe guide to the outlook for the economy. Immediately after the Brexit referendum in 2016, they pointed to a sharper downturn than was actually the case.

 

But longer-term trends in the all-sector PMI generally match up well with official quarterly growth numbers.

 

“September’s decline is all the more ominous, being the result of an insidious weakening of demand over the past year rather than a sudden shock,” Williamson said.

 

Firms which took part in Thursday’s survey - which does not cover retailers - reported that foreign customers were switching business away from Britain due to fears of a no-deal Brexit.

 

New export orders fell at the sharpest rate since March, when Britain was originally due to leave the EU.

 

Solid consumer demand has so far cushioned Britain’s economy from some of the impact of Brexit uncertainty, helped by the lowest unemployment rate since 1975 and wages that are rising at the fastest pace in a decade.

 

But the latest survey added to signs from consumer sentiment surveys that jobs could be becoming less secure.

 

Services businesses shed staff at the fastest rate in nine years in September. Taken as a whole, this week’s PMIs pointed to the sharpest fall in employment since December 2009.

 

Firms said they mostly reduced staff by not replacing leavers, rather than through lay-offs.

 

-- © Copyright Reuters 2019-10-03

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The other day was economy "unexpectedly" stronger ?

Why unexpected ?

9 minutes ago, johng said:

The other day was economy "unexpectedly" stronger ?

Project fear is to be expected until halloween if Parliament fail to scupper brexit beforehand.

Off-topic post removed.

2 hours ago, evadgib said:

Project fear is to be expected until halloween if Parliament fail to scupper brexit beforehand.

We can only hope that a crash out Brexit is avoided.

Project reality is alive and kicking.

Bungle Johnson's strategy relies on a crash out brexit for his own personal agenda. Stuff the country.

Long time ago I was a contributing member to the CIPS PMI when it was established and for many years.

 

As with all statistics, use if for support rather than enlightenment.

At least England is jumping off the deck chairs that constitute the economy of Titanic Europe. 

31 minutes ago, Cryingdick said:

At least England is jumping off the deck chairs that constitute the economy of Titanic Europe. 

I think Zimbabwe said the same when they left the British Empire.

26 minutes ago, Boatfreak said:

I think Zimbabwe said the same when they left the British Empire.

Lammy is unlikely to get the top job.

Unexpected by whom? Analysts, economists and other waste of rations?

1 hour ago, Cryingdick said:

At least England is jumping off the deck chairs that constitute the economy of Titanic Europe. 

England?

2 minutes ago, Chomper Higgot said:

England?

Not yet ????

IHS/CIPS/PMI are a waste of time. Highly politicised and not capable of correctly producing this kind of survey.

A good example this of fake news.  The headline does not justify what follows in the hack's article.

19 hours ago, billd766 said:

I agree with not putting the responsibility wholly on the EU.

 

Teresa May should accept 50% of the responsibility. It took her over 3 years to screw up Brexit for the EU and people are blaming Boris for the problem now, when he cannot do the job properly due to parliament and lawyers restricting from doing his job.

Correct. Boris operating in very difficult circumstances through no fault of his own. But he's no fool and may be able to conjure up something. Tough though.

4 hours ago, Boatfreak said:

I think Zimbabwe said the same when they left the British Empire.

Zimbabwe's independence and departure from the Commonwealth had nothing to do with the state of the UK economy. Mugabe told a crowd a few years ago when he was celebrating his 90th birthday: "The British, we don't hate you, we only love our country better." https://www.bbc.com/news/uk-42003217

20 hours ago, evadgib said:

Project fear is to be expected until halloween if Parliament fail to scupper brexit beforehand.

"Project Fear" to the rescue again ????.  Surprised nobody has had the tee shirts printed yet

1 hour ago, dunroaming said:

"Project Fear" to the rescue again ????.  Surprised nobody has had the tee shirts printed yet

I'm working on the gloat-dance as stated elsewhere ????

3 hours ago, evadgib said:

I'm working on the gloat-dance as stated elsewhere ????

Maybe goat dance would be more appropriate ????

7 hours ago, Thingamabob said:

Correct. Boris operating in very difficult circumstances through no fault of his own. But he's no fool and may be able to conjure up something. Tough though.

Boris stopped Brexit once, and he’ll stop it again.

 

Good job, Boris! He might not claim the credit for it, but you and I know who sabotaged Brexit

6 hours ago, Srikcir said:

Zimbabwe's independence and departure from the Commonwealth had nothing to do with the state of the UK economy. Mugabe told a crowd a few years ago when he was celebrating his 90th birthday: "The British, we don't hate you, we only love our country better." https://www.bbc.com/news/uk-42003217

Ian Smith took that country to independence.  Mugabe led his country to glory.  Will Boris do the same?

Edited October 4, 20196 yr by StreetCowboy

On 10/3/2019 at 6:04 PM, evadgib said:

Project fear is to be expected until halloween if Parliament fail to scupper brexit beforehand.

How many people are now operating under your ‘Project Fear’ ? So all the purchasing managers of all political persuasions no doubt in a feat of incredible organisational skill, had a clandestine meeting in a back street hotel to derail Brexit correct ? Only they were lucky to get a room as the worlds economists were next door, the farmers next to that one, the retailers booked a whole floor and the  builders took the rest !!

 

I wonder how much membership is to this mysterious ‘Project Fear’ ? 

 

Have you got nothing else ? 

Edited October 4, 20196 yr by Bruntoid

10 hours ago, Thingamabob said:

IHS/CIPS/PMI are a waste of time. Highly politicised and not capable of correctly producing this kind of survey.

Just how long is the leavers list of bias organisations now ? 

7 hours ago, Thingamabob said:

Correct. Boris operating in very difficult circumstances through no fault of his own. But he's no fool and may be able to conjure up something. Tough though.

“But he’s no fool” ????????????????

 

Currently on a 0/7 run and couldn’t see any of them coming ? Your statement is an insult to fools! 

 

 

2 minutes ago, Bruntoid said:

Just how long is the leavers list of bias organisations now ? 

Government, Parliament, the Courts, the Queen, All our institutions and 48% of voters are traitors to the nation.  Britain cannot be free until it has been ripped asunder and rebuilt as an anarco-cynicalist commune.

1 minute ago, Bruntoid said:

“But he’s no fool” ????????????????

 

Currently on a 0/7 run and couldn’t see any of them coming ? Your statement is an insult to fools! 

 

 

It is a compliment to fools that we do not consider Boris one of their number.

He is our Defender, who has prevented Brexit once, and will do so again until he dies in a ditch.

Good job, Boris!