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UK service sector growth hits seven-month low as Brexit worries mount - business live UK service sector growth hits seven-month low as Brexit worries mount - business live
(35 minutes later)
The drop in UK service sector growth last month is “thoroughly disappointing”, says economist Howard Archer of EY Item Club.
The slowdown in new business growth (to a 27-month low) “bodes ill” for future growth, Archer says, adding:
Brexit uncertainties and concerns over the UK and global economies weighed on demand for business services.
Additionally, demand for consumer services was reported to be subdued, which ties in with other signs that consumers reined in their spending at the start of the fourth quarter after splashing out over the summer
Jeremy Thomson-Cook, chief economist at foreign exchange firm WorldFirst, says Brexit delays and wider fears over the global economic outlook are hurting UK service sector firms.
He fears the situation will get worse, until the UK and EU reach an agreement.
Services PMI shows that until a Brexit deal is done, business confidence and sentiment will only move lower. Whether this is enough to take the sector out of its recent morass will only be felt in time however.
In another blow, business confidence across the services sector is its lowest since July 2016, today’s PMI report shows.
Firms are growing increasingly anxious about the risk of Brexit-related disruptions (predictions of long queues and delays at the ports if Britain leaves the EU without a deal)
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, blames the ‘ambiguity’ and lack of clarity around Brexit.
“A reluctance to commit was the message coming through loud and clear from service providers in October as the sector checked in with its worst performance since March and lowest optimism since July 2016.
“Many of the respondents attributed this poor performance and the biggest softening in new order growth since July 2016 to continuing ambiguity around the Brexit negotiations. There were also concerns over the weakness in the UK and global economies which affected client confidence and consumer spending.
Chris Williamson, chief business economist at IHS Markit, says UK services companies are suffering badly from Brexit uncertainty.
UK manufacturing growth hit a 25-month low in October (we learned last week), indicating the UK is only expanding sluggishly.
Williamson explains:
“The disappointing service sector numbers bring mounting evidence that Brexit worries are taking an increasing toll on the economy.
Combined with the manufacturing and construction surveys, the October services PMI points to the economy growing at a quarterly rate of just 0.2%, setting the scene for GDP growth to weaken sharply in the fourth quarter.
Brexit isn’t the only problem, though... “trade wars, heightened geopolitical uncertainty and tightening financial market conditions” are also weighing on the UK economy, Williamson adds.
NEWSFLASH: Growth across Britain’s service sector has slowed to a seven-month low.NEWSFLASH: Growth across Britain’s service sector has slowed to a seven-month low.
Service sector companies have reported that new business growth weakened in October, as nervous clients have cut back, according to data firm Markit.Service sector companies have reported that new business growth weakened in October, as nervous clients have cut back, according to data firm Markit.
Consumer-facing sectors such as hotels, restaurants and leisure reported the weakest performance.Consumer-facing sectors such as hotels, restaurants and leisure reported the weakest performance.
A number of companies also cited Brexit-related uncertainties, and worries that the global economic outlook is deteriorating.A number of companies also cited Brexit-related uncertainties, and worries that the global economic outlook is deteriorating.
Markit’s Services PMI, which measures activity in the sector, fell to 52.2 in October from 53.9 in September -- the lowest reading since March.Markit’s Services PMI, which measures activity in the sector, fell to 52.2 in October from 53.9 in September -- the lowest reading since March.
More to follow!More to follow!
Newsflash: British car sales have fallen again.Newsflash: British car sales have fallen again.
Just 153,599 vehicles were registered in October, down 2.9% compared with a year earlier, according to figures released today by the Society of Motor Manufacturers and Traders (SMMT). That follows a 20% plunge in October.Just 153,599 vehicles were registered in October, down 2.9% compared with a year earlier, according to figures released today by the Society of Motor Manufacturers and Traders (SMMT). That follows a 20% plunge in October.
The SMMT says sales were hit by new, tougher, pollution rules introduced in Europe this summer.The SMMT says sales were hit by new, tougher, pollution rules introduced in Europe this summer.
This has led to shortages of some models, as testing centres are fighting their way through a backlog of vehicles needing certification.This has led to shortages of some models, as testing centres are fighting their way through a backlog of vehicles needing certification.
Drivers continue to shun diesel, with sales down 21.3% year-on-year. Petrol sales rose 7%, while alternatively fuelled cars (electric) jumped by 30.7%.Drivers continue to shun diesel, with sales down 21.3% year-on-year. Petrol sales rose 7%, while alternatively fuelled cars (electric) jumped by 30.7%.
The big picture, though, is that UK car sales are 7% lower this year than in 2017.The big picture, though, is that UK car sales are 7% lower this year than in 2017.
The new car market declined in October by -2.9% to 153,599 units with overall market down -7.2% over the year to date. It's hoped the gap will narrow slightly as supply issues resulting from regulatory changes ease. pic.twitter.com/jDNMeOsZclThe new car market declined in October by -2.9% to 153,599 units with overall market down -7.2% over the year to date. It's hoped the gap will narrow slightly as supply issues resulting from regulatory changes ease. pic.twitter.com/jDNMeOsZcl
The pound has hit a two-week high against the US dollar, as the Brexit talks approach a climax.The pound has hit a two-week high against the US dollar, as the Brexit talks approach a climax.
Britain is hoping to make progress on the thorny issue of the Northern Ireland Backstop this week, so that an emergency summit could be called before the end of November.Britain is hoping to make progress on the thorny issue of the Northern Ireland Backstop this week, so that an emergency summit could be called before the end of November.
Yesterday the Sunday Times claimed that PM Theresa May has a “secret plan” to keep the whole of Britain in a customs union, avoiding a hard border in Northern Ireland.Yesterday the Sunday Times claimed that PM Theresa May has a “secret plan” to keep the whole of Britain in a customs union, avoiding a hard border in Northern Ireland.
But EU sources have told the Guardian that the two sides are still divided on crucial issues, meaning there’s only a “50-50” chance of an agreement.But EU sources have told the Guardian that the two sides are still divided on crucial issues, meaning there’s only a “50-50” chance of an agreement.
Former foreign secretary Boris Johnson is also weighing in, calling May’s proposals “an absolute stinker”. He predicts MPs would vote them down, rather than agree to abide by EU rules during a post-Brexit transition period.Former foreign secretary Boris Johnson is also weighing in, calling May’s proposals “an absolute stinker”. He predicts MPs would vote them down, rather than agree to abide by EU rules during a post-Brexit transition period.
City traders seem slightly more optimistic, though, sending the pound up by 0.25% to $1.30 against the US dollar, and €1.142 against the euro.City traders seem slightly more optimistic, though, sending the pound up by 0.25% to $1.30 against the US dollar, and €1.142 against the euro.
European stock markets have started the new week in a subdued mood.European stock markets have started the new week in a subdued mood.
The FTSE 100, German DAX and French CAC are all basically unchanged this morning. Spain’s IBEX has risen by 0.35%, but Italy’s FTSE MIB has dipped a little.The FTSE 100, German DAX and French CAC are all basically unchanged this morning. Spain’s IBEX has risen by 0.35%, but Italy’s FTSE MIB has dipped a little.
Connor Campbell of SpreadEx says:Connor Campbell of SpreadEx says:
Further evidence that China’s economy is starting to wilt under the trade war pressure – the country’s latest private sector-assessing Caixin PMI dropped to a 28 month low following a services sector slump – led to a pretty muted open in Europe this Monday.Further evidence that China’s economy is starting to wilt under the trade war pressure – the country’s latest private sector-assessing Caixin PMI dropped to a 28 month low following a services sector slump – led to a pretty muted open in Europe this Monday.
Over in Shanghai, President Xi has vowed that America cannot sink China’s economy.Over in Shanghai, President Xi has vowed that America cannot sink China’s economy.
The Chinese president told a major trade fair that the days of “winner takes all” trade policy is at an end - a non-too-subtle jab at Trump’s approach to negotiations.The Chinese president told a major trade fair that the days of “winner takes all” trade policy is at an end - a non-too-subtle jab at Trump’s approach to negotiations.
Xi also pledged to keep opening up his country’s economy, painting himself as a defender of globalisation.Xi also pledged to keep opening up his country’s economy, painting himself as a defender of globalisation.
My colleague Lily Kuo reports:My colleague Lily Kuo reports:
Xi Jinping has promised to lower import tariffs and improve access to the Chinese market in remarks meant to portray his country as a champion of globalisation as it remains locked in a trade war with the US.Xi Jinping has promised to lower import tariffs and improve access to the Chinese market in remarks meant to portray his country as a champion of globalisation as it remains locked in a trade war with the US.
“Protectionism and unilateralism is rising. Multilateralism and the free trade system are under threat … China will not close its door to the world and will only become more and more open”, the Chinese president said on Monday at the beginning of a trade fair in Shanghai.“Protectionism and unilateralism is rising. Multilateralism and the free trade system are under threat … China will not close its door to the world and will only become more and more open”, the Chinese president said on Monday at the beginning of a trade fair in Shanghai.
The speech, ahead of a meeting between Xi and US president Donald Trump at the end of the month on the sidelines of the G20 meeting in Argentina, signalled little improvement in trade ties before that meeting.The speech, ahead of a meeting between Xi and US president Donald Trump at the end of the month on the sidelines of the G20 meeting in Argentina, signalled little improvement in trade ties before that meeting.
Xi claimed China had entered a “new round of high-level opening up” but did not make any concrete concessions likely to satisfy the White House. The Chinese leader reiterated a pledge to enforce intellectual property rights, as well as open up the country’s educational, cultural and telecommunications sectors, something officials have been promising for years, with little action taken.Xi claimed China had entered a “new round of high-level opening up” but did not make any concrete concessions likely to satisfy the White House. The Chinese leader reiterated a pledge to enforce intellectual property rights, as well as open up the country’s educational, cultural and telecommunications sectors, something officials have been promising for years, with little action taken.
Anxiety over the US-China trade war ripped though Asian stock markets again today.Anxiety over the US-China trade war ripped though Asian stock markets again today.
China’s CSI 300 index fell by 0.8%, Japan’s Nikkei shed 1.5%, and Hong Kong’s Hang Seng has slumped by 2.3% in late trading.China’s CSI 300 index fell by 0.8%, Japan’s Nikkei shed 1.5%, and Hong Kong’s Hang Seng has slumped by 2.3% in late trading.
Traders are concerned by the slowdown in China’s economy, and the lack of progress between Beijing and Washington over the trade war.Traders are concerned by the slowdown in China’s economy, and the lack of progress between Beijing and Washington over the trade war.
Over the weekend, president Trump told reporters that the two sides are “getting much closer to doing something.” A breakthrough could come at this month’s G20 meeting, but nothing’s guaranteed.Over the weekend, president Trump told reporters that the two sides are “getting much closer to doing something.” A breakthrough could come at this month’s G20 meeting, but nothing’s guaranteed.
The tumble in China’s services PMI suggests that the escalating trade war with the US is taking “a massive bite out of the economy”, says Stephen Innes of foreign exchange firm OANDA.The tumble in China’s services PMI suggests that the escalating trade war with the US is taking “a massive bite out of the economy”, says Stephen Innes of foreign exchange firm OANDA.
Here’s more reaction:Here’s more reaction:
China’s services sector (now bigger than industrial sector) back to lows of recent years, according to Caixin PMI. To be seen if it rebounds again. Note that India’s economy (and service sector PMI) have gone in the opposite direction. pic.twitter.com/U02onSG37fChina’s services sector (now bigger than industrial sector) back to lows of recent years, according to Caixin PMI. To be seen if it rebounds again. Note that India’s economy (and service sector PMI) have gone in the opposite direction. pic.twitter.com/U02onSG37f
China's Services PMI hits 13-month low @50.8 from 53.1Same trajectory as last week's manufacturing PMI. pic.twitter.com/iCkZsjo2g5China's Services PMI hits 13-month low @50.8 from 53.1Same trajectory as last week's manufacturing PMI. pic.twitter.com/iCkZsjo2g5
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Fears over China’s economy are swirling today, as growth in the country’s service sector stumbles.Fears over China’s economy are swirling today, as growth in the country’s service sector stumbles.
New figures from data provider Caixin shows that growth across China’s services companies fell to a 13-month low last month, as new orders dried up.New figures from data provider Caixin shows that growth across China’s services companies fell to a 13-month low last month, as new orders dried up.
Service companies reported that new business had stagnated for the first time in almost a decade, with many saying that demand was weak this quarter.Service companies reported that new business had stagnated for the first time in almost a decade, with many saying that demand was weak this quarter.
This dragged the Caixin China General Services Business Activity Index (which measures growth) down to just 50.8 in October, sharply down from 53.1 in September. That’s the lowest reading since September 2017, and worryingly close to stagnation.This dragged the Caixin China General Services Business Activity Index (which measures growth) down to just 50.8 in October, sharply down from 53.1 in September. That’s the lowest reading since September 2017, and worryingly close to stagnation.
Chinese manufacturers also had a sticky October, with costs jumping sharply thanks to the tariffs imposed on US imports.Chinese manufacturers also had a sticky October, with costs jumping sharply thanks to the tariffs imposed on US imports.
Caixin says:Caixin says:
The slowdown was broad-based by sector, with both services and manufacturing noting weaker performances compared to the previous month.The slowdown was broad-based by sector, with both services and manufacturing noting weaker performances compared to the previous month.
Notably, manufacturing production stagnated, following increases in each of the preceding 27 months.Notably, manufacturing production stagnated, following increases in each of the preceding 27 months.
This dragged Caixin’s wider measure of Chinese private sector growth down to a 28-month low of 50.5, from 52.1 in September.This dragged Caixin’s wider measure of Chinese private sector growth down to a 28-month low of 50.5, from 52.1 in September.
Here are the key points from the report:Here are the key points from the report:
Services activity growth weakens to 13-month low, while manufacturing production is broadly unchangedServices activity growth weakens to 13-month low, while manufacturing production is broadly unchanged
Total new orders edge closer to stagnationTotal new orders edge closer to stagnation
Increase in service sector staff numbers largely offsets fall in manufacturing employmentIncrease in service sector staff numbers largely offsets fall in manufacturing employment
Dr. Zhengsheng Zhong, director of Macroeconomic Analysis at CEBM Group, warned that Chinese companies are losing confidence, in the face of the trade war triggered by Donald Trump.Dr. Zhengsheng Zhong, director of Macroeconomic Analysis at CEBM Group, warned that Chinese companies are losing confidence, in the face of the trade war triggered by Donald Trump.
“The Caixin China Composite Output Index dipped to 50.5 in October from the previous month, reaching its lowest level since June 2016, indicating mounting downward pressure on China’s economy.“The Caixin China Composite Output Index dipped to 50.5 in October from the previous month, reaching its lowest level since June 2016, indicating mounting downward pressure on China’s economy.
The subindex for new orders fell, pointing to softening overall demand conditions. The employment subindex edged up despite staying in negative territory, which could possibly be due to government efforts to stabilize the labor market. The subindex for input costs remained unchanged from the month before, while the one for output charges inched up, indicating easing pressure on company profit margins — though upward price pressure remained. The subindex for future output edged down, reflecting weakening confidence among companies.”The subindex for new orders fell, pointing to softening overall demand conditions. The employment subindex edged up despite staying in negative territory, which could possibly be due to government efforts to stabilize the labor market. The subindex for input costs remained unchanged from the month before, while the one for output charges inched up, indicating easing pressure on company profit margins — though upward price pressure remained. The subindex for future output edged down, reflecting weakening confidence among companies.”
Later today we discover if Britain’s service sector did any better.Later today we discover if Britain’s service sector did any better.
The UK services PMI is expected to drop to 53.3, from 53.9 in September, follThe UK services PMI is expected to drop to 53.3, from 53.9 in September, foll
The agenda:The agenda:
9am GMT: UK new car sales for October9am GMT: UK new car sales for October
9.30am GMT: UK service sector PMI for October9.30am GMT: UK service sector PMI for October
9.30am GMT: Eurozone Sentix survey of investor confidence9.30am GMT: Eurozone Sentix survey of investor confidence
3pm GMT: US service sector PMI for October3pm GMT: US service sector PMI for October