The latest Markit/CIPS UK Services Purchasing Managers Index (PMI) covering the ‘Services’ sector, reveals that – both output and new business – fell for the first time in three-and-a-half-years, and at the fastest rates since Q1 2009. Employment in the sector was unchanged from June, halting the period of continued job creation which commenced in 2013.
The Business Activity Index came in at 47.4 in July, down from the 52.3 recorded in June. Any figure below 50 indicates contraction and therefore a fall in output for the sector. At 4.9 points, the decline was the largest seen since the survey began in 1996.
Among some of the mitigating factors quoted were uncertainty surrounding Brexit, increased cost pressures, particularly in salaries, fuel and food costs and the consequences of Sterling’s devaluation.
Markit’s Chief Economist, Chris Williamson, said: “The marked service sector downturn follows news from sister PMI surveys showing construction activity suffering its steepest decline since mid-2009 and manufacturing output contracting at the fastest rate since late-2012. At these levels, the PMI data are collectively signalling a 0.4% quarterly rate of decline of GDP.
“It’s too early to say if the surveys will remain in such weak territory in coming months, leaving substantial uncertainty over the extent of any potential downturn. However, the unprecedented month-on-month drop in the all-sector index has undoubtedly increased the chances of the UK sliding into at least a mild recession.”
The importance of this particular PMI is the fact that the output of the UK’s ‘Services’ sector currently represents about 75% of current Gross Domestic Product and is therefore an important pulse point for the overall economy.
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