UK PMI Services dropped to 49.5 in September, down from 50.6 and missed expectation of 50.3. All Sector PMI Output dropped to 48.8, down from 49.7, worst reading since July 2016. it’s also the first back-to-back contraction since 2012. Markit noted that new and outstanding business both declined. There was fastest rate of job shedding since August 2000, and weakest expectations for activity since July 2016.
Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:
“A trio of grim reports on the economy means that the vast service sector has now joined manufacturing and construction in decline. Only the collapse in confidence immediately following the 2016 referendum has seen a steeper overall deterioration in the economy during the past decade, but 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.
“At current levels the surveys point to GDP falling by 0.1% in the third quarter which, coming on the heels of a decline in the second quarter, would mean the UK is facing a heightened risk of recession.
“Brexit-related concerns dominated the September survey responses, linked by companies to falling sales, cancelled and postponed projects, a lack of investment and job losses. “While the early summer had seen resilient jobs growth, the surveys indicate that employment is now falling at the fastest rate since December 2009.
“The increasingly dire readings push the surveys further into territory that would normally be associated with policy stimulus from the Bank of England, suggesting a greater likelihood that the next move in interest rates will be a cut.”
