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UK economy virtually stagnant

06 May 2016

The forward-looking Markit/CIPS PMI (Purchasing Managers' Indices) have just been released, collectively showing a virtual stagnation of the UK economy.

The figures indicate that GDP growth for April was just 0.1%, compared to the already weak first quarter growth of 0.4%. This was down from 0.6% in the fourth quarter of 2015.

The Services PMI (about 78% of UK GDP) hit a 38-month low of 52.3, from 53.7 (a level above 50 means activity is still expanding), and has been on a downward trend since August 2013, when it was just over 62. The average level of the index since its inception in July 1996 is 55.2

The upcoming EU referendum on June 23rd is the most often mentioned cause of the continuing slowdown, which is in addition to weak global economic activity.

Services companies are also being squeezed by rising input prices – primarily the introduction of the National Living Wage – which have risen to a 27-month high. Whilst input prices are still relatively benign, in a world of low-growth it means profits are being eroded as costs can’t be passed on to customers.

It’s a similar story with UK Construction activity (7% of GDP) being the slowest since June 2013 – the index was 52.0 from 54.2 in March

Manufacturing (13% of GDP) showed the first actual contraction in activity since March 2013, with the index falling below the critical 50.0 mark to 49.2 (from 50.7 in March)

Manufacturing and Construction companies also cited uncertainties due the upcoming EU Referendum

The PMI data from Markit/CIPS are highly regarded as reliable forward-looking data. The data is compiled from responses from companies' Purchasing Managers, and are based on hard facts, not opinion, on what is happening at 'grass roots' level in the economy

For the actual releases click here:





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