The latest set of Markit Purchasing Managers’ Index figures suggest that the dominant sector of the UK economy, services, is slowing down. The most recent reading came in at 50.1, on this scale anything above 50 suggests growth with a value less than 50 indicating contraction.
Whilst the January figure does still indicate weak growth, analysts were expecting a stronger performance of 51 which would mark a modest slowdown over the December reading of 51.2, so the slowdown is much more marked than expected.
Chris Williamson of HIS Markit blamed a combination of Brexit uncertainty with a general slowing of the global economy for the figures:
"Growth ground almost to a halt in January, matching similar disappointing news in the manufacturing and construction sectors. The last three months have seen the economy slip into its weakest growth spell for six years and indicate that GDP likely stagnated at the start of 2019 after eking out modest growth of just 0.1% in the fourth quarter. The survey results indicate that companies are becoming increasingly risk averse and eager to reduce overheads in the face of weakened customer demand and rising political uncertainty. Such worries were in turn most commonly linked to heightened Brexit anxiety, though wider global political and economic factors were also seen to have been taking their toll on demand."
The manufacturing PMI he referred to came in at 52.8, again, showing an expansion of the sector, but the second worst reading since July 2016.
Politicians in government make much of the fact that the economy is “doing well” and expanding despite Brexit headwinds. However, this is disingenuous since the comparison needs to be made in terms of the growth of other leading global economies. The UK’s rate of expansion has fallen from the fastest growing in the G7 to the slowest as the Brexit drama has unfolded.