UK services PMI drops sharply to 52.2 in October, a big miss on expectations

The services sector activity in the UK economy deteriorated more-than-expected in the month of October, missing the consensus forecast, a fresh report from Markit Economics showed on Monday.

The services PMI dropped to 52.2 in October versus a 53.9 reading booked in September. Markets predicted 53.3 last month.

Key Points:

A moderate rise in business activity during October.

New work increases at slowest pace since July 2016.

Strong input cost inflation continues.

Chris Williamson, Chief Business Economist at IHS Markit, which compiles the survey:

“The disappointing server 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.”

“However, while it is not surprising to see that Brexit uncertainties are increasingly undermining business activity at this stage of the negotiations, the survey responses also suggest that the economy is facing other headwinds, including a broader global slowdown, trade wars, heightened geopolitical uncertainty and tightening financial market conditions.”