UK PMI Construction dropped to 39.3 in March, down from 52.6, indicating the steepest contraction output since April 2009. Employment dropped at the fastest pace since September 2010. Business expectations also slumped to lowest since October 2008.

Tim Moore, Economics Director at IHS Markit: “The closure of construction sites and lockdown measures will clearly have an even more severe impact on business activity in the coming months. Survey respondents widely commented on doubts about the feasibility of continuing with existing projects as well as starting new work. Construction supply chains instead are set to largely focus on the provision of essential activities such as infrastructure maintenance, safety-critical remedial work and support for public services in the weeks ahead.”

Full release here.

UK GDP surprisingly contracted by -0.2% qoq in Q2, worse than expectation of 0.0% qoq. That’s also the first quarterly contraction since 2012. Over the year, GDP grew 1.2% yoy, slowed from Q1’s 1.8% yoy and missed expectation of 1.4% yoy. Looking at some details, services sector provided the only positive contribution to GDP growth, with 0.1% qoq growth. Production sector contracted sharply by -1.4% qoq, driving by sharp decline in manufacturing output. In June, GDP rose 0.0% mom, below expectation of 0.1% mom.

Chancellor of the Exchequer Sajid Javid said, “this is a challenging period across the global economy, with growth slowing in many countries. But the fundamentals of the British economy are strong – wages are growing, employment is at a record high and we’re forecast to grow faster than Germany, Italy and Japan this year.” And, “the government is determined to provide certainty to people and businesses on Brexit – that’s why we are clear that the UK is leaving the EU on October 31.”

Also released from UK, industrial production dropped -0.1% mom, -0.6% yoy in June, versus expectation of -0.2% mom, -0.3% yoy. Manufacturing production dropped -0.2% mom, -1.4% yoy, versus expectation of -0.2% mom, -1.1% yoy. Visible trade deficit narrowed to GBP -7.0B in June versus expectation of GBP -11.3B.

UK PMI manufacturing rose to 53.8 in September, up from 53.0 and matched expectations. Keying findings showed “output and new order growth both accelerate”, “input cost and output charge inflation strengthen”.

Rob Dobson, Director at IHS Markit, which compiles the survey:

“September saw a mild improvement in the performance of the UK manufacturing sector. Domestic market demand strengthened, while increased orders from North America and Europe helped new export business stage a modest recovery from August’s contraction. Business confidence also rose to a three month high.

“Despite these causes for short-term optimism, conditions in manufacturing are still relatively lacklustre overall. Based on its historical relationship with official ONS data, the latest survey is consistent with output expanding at only a moderate pace. Although total exports rose, exports of goods used as inputs by other manufacturers fell for the third straight month, ending the worst quarter for over three years for such exporters, suggesting that foreign companies may be sourcing less from UK-based component suppliers.

“Many UK manufacturers also noted that the backdrop of Brexit and a volatile exchange rate were making any forecasting activity increasingly difficult, with uncertainty adding to reluctance to hire. Headcounts fell at larger companies for a second successive month.

“On the price front, both output charges and input costs rose at faster rates in September, which may exert further upward pressure on consumer prices in future.”

Full release here.

Also from UK, mortgage approvals rose to 66k in August. M4 money supply rose 0.2% mom in August.