Mubasher: UK private sector activity saw the steepest drop since more than three years in November, led by modest output in both of manufacturing and services sectors, a survey report by IHS Markit and Chartered Institute of Procurement and Supply (CIPS) showed.
The headline IHS Markit/CIPS UK composite output index came in at 48.5 in November, compared with the revised estimate of 50 in the preceding month.
While this marked the sharpest fall level recorded since July 2016, it was reflected that the sector entered into a contractionary territory, with the index plunging below the no-change mark, which separates growth from contraction.
“With an upcoming general election adding to Brexit-related uncertainty about the outlook, it’s no surprise to see UK businesses reporting falling output and orders in November,” IHS Markit’s chief business economist Chris Williamson said.
Both manufacturing and services sectors recorded weak levels of output, amid an absence of clarity over Brexit, as well as the uncertainty over general election.
The IHS Markit/CIPS UK Manufacturing purchasing managers’ index (PMI) came in at 48.3 in November, compared with the revised reading of 49.6 in the prior month, remaining in shrinking territory since May.
Customer overstocking over the run-up to the 31 October Brexit deadline weighed on production volumes in November.
“Over the past few months we have seen manufacturing companies oscillate between stock building and unravelling and in November, the sharpest drop in stocks of purchases since June 2018 showed inventory levels being unpicked again as another Brexit deadline passed,” CIPS group director Duncan Brock said.
The IHS Markit/CIPS UK Services PMI plunged to 48.6 in November, compared with a final 50 in the previous month.
Soft demand for services was ascribed to postponed decision-making in response to domestic political uncertainty, mostly among big companies.
New business volumes extended their decline for the third month running, with the sharpest drop of overseas sales recorded since the start of this year.
The latest uptick in operating expenses was the weakest since August 2016.
“In the services sector, businesses assaulted by years of rising prices held back from passing on the full benefit of lower input cost inflation and held on to their margins, which did nothing to persuade already reluctant customers to spend,” Brock noted.
By 10:10 am GMT, the GBP/USD pair fell by 0.31% to $1.2874, while the EUR/GBP pair rose by 0.30% to GBP 0.8592.
