Brexit pessimism and increased business uncertainty caused by the upcoming UK general election caused overall business activity to weaken in November. The PMI composite slumped from 50 in October to 48.5 in November, dampening pound sentiment.
Commenting on this morning’s data, Markit’s Chief Business Economist Chris Williamson stated: “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. The decline signalled by the flash PMI follows stagnation in October and adds to what has been the survey’s worst spell since the recession of 2008-9.
“The PMI surveys are not only warning that the underlying trend in the economy is deteriorating markedly, but also that the labour market is cooling. A worsening jobs market has the potential to feed through to weaker consumer spending and slower wage growth, thereby undermining two of the key supports to the economy in recent months.”
Meanwhile, the single currency edged up against the pound despite Germany’s flash PMI composite showing that business activity remained subdued.
Markit revealed that while the PMI rose for the second month in a row, the reading of 49.2 remained one of the lowest in the last six-and-a-half years.
The bloc’s largest economy saw growth in the service sector, although the PMI Activity Index slumped to a 38-month low of 51.3.
Commenting on this, Markit Principal Economist, Phil Smith said: “While still showing a degree of resilience, the service sector is growing only modestly and at its slowest rate in over three years. By contrast, manufacturing remains firmly in contraction, but many of the indicators here are at least moving in the right direction and it would seem the worst of the downturn is over barring any shocks.”
Looking ahead, the single currency could extend its gains at the start of next week following the release of Germany’s business climate data if sentiment improved.