UK economy "out of business" amid fears over global economy



[ad_1]

The services sector in the UK stagnated last month as new orders fell for the first time in two and a half years, according to the IHS Markit / CIPS Purchasing Managers Index (PMI).

The numbers show a reading of 50.1 in January, lower than December's 51.2.

Chris Williamson of IHS Markit said the results indicated that the UK economy "may slow down or worsen".

He said this was due to the growing uncertainty badociated with Brexit, which coincided with a more pronounced slowdown in the global economy.

Economists expected a reading of 51 – a figure above 50 indicates growth.

It follows last Friday's news that PMI manufacturing numbers dropped to 52.8 last month – the second weakest reading since July 2016.

The figures revealed that British manufacturers were preparing for Brexit by storing their raw materials at a record pace and that the sector was in danger of sinking into recession.

"Political uncertainty"

Speaking about service sector figures, Williamson said, "Growth was virtually halted in January, which is a disappointing news in the manufacturing and construction sectors.

"The past three months have seen the economy plunge back into its weakest growth period in six years and indicate that GDP has probably stagnated in early 2019 after posting modest growth of only 0.1% in fourth trimester.

"The survey results indicate that companies are increasingly risk-averse and are eager to reduce overhead costs in the face of weaker customer demand and rising political uncertainties." .

"These concerns were in turn most often related to increased Brexit anxiety, although broader global political and economic factors also had adverse effects on demand."

Analysis:

Andy Verity, economics correspondent

Until recently, what was most remarkable, it was not the economic impact that all the uncertainties related to Brexit had had, but how little. Growth continued. The number of employees continues to hit new records. The services sector, which accounts for four-fifths of our economy, has continued to grow.

But above all, these optimistic figures on employment and growth are lagging indicators, about two months behind the reality. The Purchasing Managers Index is more up-to-date and can be used to survey employees of companies that make financial decisions.

According to them, the most prospective indicators, such as new customer orders, are down.

However – before baduming that Brexit's policy is slowing down the economy, it should be noted something. In July 2016, just after the referendum, respondents to the survey were even darker than they are now.

Some economists have predicted the flight of capital; others have predicted the recession. These fears, at least so far, have proved largely misplaced.

Mr. Williamson's views on uncertainty about the impact of Brexit have been confirmed by other experts.

Samuel Tombs, British chief economist at Pantheon Macroeconomics, said: "Service companies could not be clearer by accusing Brexit's uncertainties of stagnant activity in January".

He added that the figures suggested that activity could decline over the next few months, but similar forecasts for 1998, 2001 and 2003 "did not materialize".

Duncan Brock, director of the Chartered Institute of Procurement and Supply, said: "Brexit uncertainty continues to be at the heart of the malaise, as customers have been slow to place orders and ambiguities."

[ad_2]
Source link