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UK Services PMI At 3 Month Low

James Boston
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UK Services PMI At 3 Month Low

September has produced an unusual down blip for the UK economy in terms of the month’s Purchasing Managers Indices (PMI). Following the round of finalised numbers across the sectors this week the overall Composite PMI is reading lower at a level of 54.7, this number had been trending solidly upwards and the scale of the pull back today has somewhat caught markets by surprise. At 57.4 the UK’s Composite PMI is markedly lower in September than the August reading of 59.3, a slight drop had been forecast but only to 58.2.

Yesterday’s Construction PMI was the only bright spot in this series of data this week for the UK, this registered a slight gain from 64.0 to 64.2. The real problem areas this month appear to be in the Manufacturing and Services sectors. Manufacturing data announced on Wednesday showed a slight drop from 52.2 to just 51.6, there had been anticipation for some moderate growth in this sector. The Services number announced this morning however is the real culprit in Britain’s weak PMI’s, this has been reported as 58.7 compared to 60.5 in August, consensus here was for a 59.0 reading today.

The drop in the services number represents a three month low for the UK but this needs to be taken in the context of the recent run of rapid expansion in Britain’s economy, the PMI reading for the services sector is well above the long term average and the previous reading in August represented a nine month high for the indicator.

The Bank of England has been cautioning about a slowing pace of growth for the UK economy during the last quarter of this year and with the tailing off of the data recently this looks very much like coming to pass. This settling down in UK growth potentially brings welcome stability but markets will be watching for any signs of excessive slowing.

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