People walk through the Canary Wharf financial district of London, Britain, December 7, 2018. -Reuters
Britain's services sector stagnated last month as concerns about Brexit caused new orders to fall at the fastest rate in six months, according to a monthly survey that suggests the economy made a subdued start to the final quarter of 2019.
The IHS Markit services Purchasing Managers' Index (PMI) edged up to 50.0 which represents zero growth from 49.5 in September, one of the lowest readings since Britain was last in recession in 2009. Equivalent PMIs for the manufacturing and construction industries remained in contractionary territory in October. This kept the all-sector PMI below 50 for a third month in a row, the first time this has happened since 2009.
"The underlying business trend remains one of stagnation at best," IHS Markit economist Chris Williamson said, adding that October's reading on its own was consistent with a 0.1% quarterly fall in GDP.Britain's economy has lost momentum this year, hurt by a global downturn due to the US-China trade war as well as increased Brexit uncertainty.
Businesses have struggled to plan around deadlines for leaving the European Union that have changed three times this year, leading to volatility in official figures that has not always been tracked by the PMI.
The last set of official quarterly data showed the economy shrank by 0.2% in the three months to June, as businesses dealt with an overhang of raw materials purchased ahead of the original March 29 Brexit deadline.
Most economists think there was a limited rebound in the third quarter and that Britain will dodge outright recession this year as the threat to businesses of a disruptive no-deal Brexit on Oct. 31 has lifted.
The Bank of England is due to publish updated growth forecasts on Thursday but economists polled by Reuters do not expect any change in interest rates ahead of an early election on Dec. 12 which could reshape policy on Brexit and spending.
For now, businesses surveyed by IHS Markit say Brexit worries are reducing orders, which fell in October by their most in six months for services businesses. On the all-sector measure, orders fell at the third-fastest rate since 2009.
Businesses also cut staff numbers two months running for the first time sine 2009, boding poorly for Britain's job market which until recently has seen the lowest unemployment since 1975 and the fastest pay growth in a decade.
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