UK: Subdued Services PMI with mounting Brexit uncertainty – ING

According to James Smith, developed markets economist at ING, UK’s latest services PMI was a little better than hoped, at 51.4, partly driven by better flows of new orders from overseas, according to Markit/CIPS.

Key Quotes

“With Brexit uncertainty mounting, the fact that expectations for the year ahead dipped to the lowest level since March underlines the challenges facing the sector over coming months.”

“One of the major risks to the service sector – as well as the economy as a whole – comes from investment. Friday’s GDP figures may well reveal that business spending resumed its downward trend, a pattern that is likely to continue for the rest of the year. Brexit uncertainty is limiting appetite to expand, but contingency planning activities ahead of 31 October may also limit resources available for possible investment projects.”

“Having said all of that, one positive from this latest PMI is that retail reportedly performed a little better in July.”

“Away from the volatility in the production and inventory numbers, we expect underlying UK growth to remain capped at around 0.2-0.3% for at least the rest of 2019.”