Growth in the UK services sector declined notably in November, with the IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) droppng from 52.2 in October to 50.4, markedly undershooting analysts’ expectations. The indicator is now only just above the 50-point threshold that separates expansion from contraction.
The fall in November was driven by slower expansions in new orders and employment, with weaker employment growth likely driven by higher wage pressures and hiring difficulties. Moreover, business sentiment in November was the weakest in over two years, amidst intensifying Brexit-related uncertainty. On the price front, input and output cost inflation slowed.
The IHS Markit/CIPS manufacturing PMI ticked up from 51.1 in October to 53.1 in November. As a result, the index moved further above the 50-point threshold that separates expansion from contraction in activity in the manufacturing sector, where it has been since August 2016.
November’s increase came on the back of a recovery in new orders and employment. However, new export orders contracted for the second straight month. Input and output prices rose in November, while firms remained generally optimistic, although business sentiment fell to an over two-year low on the back of Brexit-related uncertainty.
According to Chris Williamson, Chief Business Economist at IHS Markit: “A sharp deterioration in service sector growth leaves the economy flatlining in November as Brexit concerns intensified. Measured across services, manufacturing and construction, the survey results suggest that the pace of economic growth has stalled.”
FocusEconomics Consensus Forecast panelists see fixed investment growing 1.9% in 2019 and 2.3% in 2020.