Investment Clock insights

UK: Composite PMI: Upside surprise...but consistent with zero GDP growth


Melanie Baker

5 November 2019

The composite Purchasing Managers’ Index (PMI) improved to 50.0, from 49.3. that follows an improvement in the manufacturing gauge (helped by Brexit preparations), and an improvement in PMI services.
A composite at 50.0 is, on the face of it, consistent with close to zero growth in the UK economy.  Actual GDP growth is likely to be stronger than that in Q3 after decent monthly GDP figures earlier this summer, but survey data still suggests a more stagnant end to the year. 
The stronger than expected improvement in the services (and composite) PMI is welcome, but a services PMI of 50.0 is still weak by UK standards. The details weren’t particularly upbeat either, with service providers reporting lower intakes of new business and new export business still falling. Output levels look to have been supported by existing business and sharply falling backlogs. 
There was some improvement in the expectations indicator for services, with some firms mentioning that uncertainty would be reduced following any resolution to Brexit early next year.  However, the survey period was 11-29 October, so the responses will largely have been received after the optimism generated from the Varadkar-Johnson meeting and subsequent progress towards a deal… but before MPs voted for a general election. 

The composite Purchasing Managers’ Index (PMI) improved to 50.0, from 49.3. that follows an improvement in the manufacturing gauge (helped by Brexit preparations), and an improvement in PMI services.

A composite at 50.0 is, on the face of it, consistent with close to zero growth in the UK economy.  Actual GDP growth is likely to be stronger than that in Q3 after decent monthly GDP figures earlier this summer, but survey data still suggests a more stagnant end to the year. 

The stronger than expected improvement in the services (and composite) PMI is welcome, but a services PMI of 50.0 is still weak by UK standards. The details weren’t particularly upbeat either, with service providers reporting lower intakes of new business and new export business still falling. Output levels look to have been supported by existing business and sharply falling backlogs. 

There was some improvement in the expectations indicator for services, with some firms mentioning that uncertainty would be reduced following any resolution to Brexit early next year.  However, the survey period was 11-29 October, so the responses will largely have been received after the optimism generated from the Varadkar-Johnson meeting and subsequent progress towards a deal… but before MPs voted for a general election. 

Source: Refinitiv Datastream as at 15/08/2019

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