Services PMI comes in at three-year low in April – rounding off hat-trick of weak economic data
The UK economy could be growing at its slowest pace in three years, according to purchasing managers' index (PMI) data out this week, which has raised serious concerns about the security of the economic recovery.
Today it was the turn of services – which makes up four-fifths of the UK economy – to show signs of a slowdown, completing a "triple-whammy of disappointing news," following weak data from the manufacturing and construction sectors earlier in the week.
The PMI for April came in at a score of 52.3, the lowest since February 2013, and down from 53.7 in March. Scores above 50 indicate expansion and those below indicate a sector is shrinking.
| Markit/CIPS PMI | Lowest score since |
| Services | February 2013 |
| Manufacturing | February 2013 |
| Construction | June 2013 |
Services firms surveyed by Markit and the Chartered Institute of Procurement and Supply (CIPS) said that they were still taking on new business and hiring staff last month, though at a more subdued pace, as they pointed to the introduction of the national living wage as a significant extra burden.
"The slowdown in the service sector follows similar weakness in manufacturing and construction to make a triple-whammy of disappointing news on the health of the economy at the start of the second quarter," said Chris Williamson, chief economist at Markit.
UK PMI falls further into #BOE "rate cut" territory in April pic.twitter.com/7LvMZecitD
— Chris Williamson (@WilliamsonChris) May 5, 2016
Brexit fears, too, played a role in weaker confidence and a more pessimistic outlook on the next 12 months.
"April also saw an increase in the number of companies reporting that uncertainty about the EU referendum caused customers to hold back on purchases, exacerbating already-weak demand linked to global growth jitters and ongoing government spending cuts," added Williamson.
#UK services PMI makes a new low, following manufacturing. #Brexit uncertainty impacting business activity pic.twitter.com/VXMeMV9JDh
— Anna Stupnytska (@AnnaStupnytska) May 5, 2016
"Uncertainty over the EU Referendum is clearly taking its toll on activity and with this backdrop, we expect second quarter GDP growth to dip below the already disappointing first quarter," said Dean Turner, an economist at UBS.
Read more: Do stock markets care about GDP?
"Brexit concerns are starting to weigh on activity," observed Scott Bowman, UK economist at Capital Economics.
"In the near term, uncertainty ahead of the EU referendum – a factor cited by survey participants as keeping a lid on some activity this month – should keep economic growth fairly subdued."