UK Preliminary Services PMI enters contraction with 48.7 in August vs. 50.8 expected
- UK Manufacturing PMI declines to 42.5 in August, below expectations of 45.0.
- Services PMI in the UK contracts to 48.7 in August, misses estimates.
- GBP/USD drops below 1.2700 on disappointing UK business PMIs.
The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) dropped further to 42.5 in August versus 45.0 expected and, 45.3 – July’s final print.
Meanwhile, the Preliminary UK Services Business Activity Index hit a seven-month low of 48.7 in August, compared with a 51.5 final print for July and the 50.8 market consensus.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector’s spring revival. The survey is indicative of GDP declining by 0.2% over the third quarter so far.”
“While a further hike in interest rates in September looks to be on the cards, the August PMI data will add to speculation that rates could soon peak,” Williamson added.
FX implications
GBP/USD is losing 0.35% on the day to trade at 1.2680, as of writing. The downbeat UK Manufacturing and Services PMI data suggests that the Bank of England (BoE) could be nearing the end of its tightening cycle, which is smashing the Pound Sterling.