UK services sector 'iced up' in March, says PMI - Supply Management

PMI: UK services sector 'iced up' in March

5 April 2018

Heavy snow and weak consumer demand hit the UK’s services sector last month, which grew at its slowest rate since just after the Brexit vote in 2016, the latest purchasing managers' index (PMI) has shown.

The IHS Markit/CIPS services PMI showed business activity growth across the UK service sector had slowed, plunging to 51.7 in March from 54.5 in February – its lowest reading since July 2016.

The report said snow disruption and the unusually bad weather conditions for the month had been a “key factor” holding back business activity growth. 

UK services also reported weak consumer demand, as well as concern about the country’s departure from the EU in a year’s time, as being behind the weak growth in new orders.

Chris Williamson, chief business economist for IHS Markit, said bad weather was the biggest driving force of the sharp decline in the services sector in March.

“The UK economy iced up in March, suffering the weakest increase in business activity since the Brexit vote amid widespread disruptions caused by some of the heaviest snowfall in years,” he said.

The PMI also showed employment growth slipped to a three-month low in the services sector, with numbers only rising “at only a moderate pace” in March and job creation had dropped to its slowest of the year.

The UK’s construction sector PMI showed a similar fall on Wednesday, while manufacturing activity inched higher during the month. 

Williamson said that looking at the first three months of 2018, the collective sector figures suggest the UK economy grew at a quarterly rate of slightly less than 0.3%, down from an already modest 0.4% at the end of 2017.

However, he added that the dip was comparable to prior months when there had been heavy snow in the UK, so it was unlikely to switch up policymakers’ views on the overall picture for the economy.

“The indications of solid employment growth and stubbornly high price pressures therefore leave a widely-touted May rate hike very much in play,” he said.

“Encouragingly, in January 2010 and December 2010, the PMI fell sharply due to heavy snow but in both cases the decline was more than reversed in the following month. Some caution is warranted this year, however, as a drop in business expectations about the year ahead during March suggests the underlying trend remains one of weaker economic growth compared to that seen late last year.”

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