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UK CommentUK PMIs continue to signal stagnation

  1. Services sentiment pulled up by slight improvement in new orders
  2. Overall sentiment pulled down by manufacturing and construction weakness
Services sentiment pulled up by slight improvement in new orders
The UK Services PMI index came in slightly better than expected in May at 51.0, up from 50.4 in April. The market consensus was 50.5. Sentiment was pulled slightly higher by an increase in new work; the first improvement in five months. However, the rate of new business expansion was still at its weakest since December last year. And despite the increase in new work, backlog of work continued to decline across the sector for an eighth consecutive month. Inflationary pressure was reported to have eased overall in May, with the rate of cost inflation dropping to a 12-month low. Still, efforts to protect margins had led to the sharpest rise in prices charged by service providers so far in 2019. Regarding the outlook for the sector, there were reports citing cautious optimism about the outlook for customer demand. However, domestic political uncertainty remained a key factor holding back growth expectations.
Overall sentiment pulled down by manufacturing and construction weakness
Despite the small improvement in the services sector in May, activity in the manufacturing and construction sectors deteriorated. In the manufacturing sector, both production and new orders fell as stockpiling activities paused. The PMI composite therefore remained unchanged from April to May at 50.9. Based on past form, the PMI composite suggests the UK economy remains close to stagnation. According to the PMI surveys, many businesses remain cautious when it comes to spending and investing due to the political uncertainty in the UK, but also due to global risks.


 


Disclaimer

Kari Due-Andresen

Chief Economist Norway

Norway and UK

kadu01@handelsbanken.no

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