The UK economy appears to be slipping ever closer to a recession as firms brace themselves for a risk of a disruptive Brexit. According to Services PMI released this morning, the UK’s dominant sector took an unexpected sharp downturn for the month of September.
September’s services Purchasing Managers’ Index (PMI) fell by more than predicted, tumbling to a six-month low of 49.5, below the 50 level that divides growth from contraction. As explained in my previous market report, a reading below 50 shows contraction and above shows expansion.
The reading from the UK today was also the worst reading for service PMIs among major advanced economies in September.
Combined with even weaker manufacturing and construction surveys earlier this week, September’s all-sector PMI sank to 48.8 from 49.7, its lowest since the month after the referendum decision to leave the EU in June 2016.
With these worrying figures we saw the Pound weaken across the board but not as much as expected. It looks like all eyes will be on the new Brexit proposal set out by Johnson.
PM Boris Johnson sent new Brexit proposals to the EU of Wednesday. He said that unless the Bloc compromised, Britain would leave without a deal at the end of the month.
European Union officials expressed doubt that the latest British proposals on Brexit could produce an agreement before the end of the month, with one saying Prime Minister Boris Johnson’s plan “can’t fly” as it stands.
Its not all doom and gloom as the bloc was careful not to dismiss the proposals too soon and that more talks between both sides are scheduled for tomorrow. They have said however the plan would need to be fundamentally reworked to become acceptable.
It seems that Investors have seen this as a positive and as a result we have seen the Pound strengthen during today’s afternoon session, edging GBP/EUR close to the 1.13’s.