Is the risk of a UK recession increasing? New data from IHS Markit suggests the UK service sector has just seen its weakest growth for the best part of a year. The service sector Purchasing Managers’ Index fell back from 53.8 in July to 53.2 in August.
While any reading over 50 indicates growth there are worries about rising UK costs due to the muscular euro and increased uncertainty over spending decisions, many clearly being delayed from the UK end.
“In services,” said Chris Williamson, chief economist at IHS Markit, “the weaker growth trend was most evident in consumer–facing sectors such as hotels & restaurants and other personal services, which includes businesses such as cinemas, gyms and hairdressers. The overall level of optimism also remained subdued,” he added.
Despite the pale UK economic pallor sterling edged up robustly against both the dollar and the euro helped by appalling factory numbers from the US – +3.3% in June vs -3.2% in July – and frayed nerves around Kim Jong-un’s apparent ‘begging for war’.
The uncertainty of the European Central Bank’s Thursday meeting adds to the currency jitters. At close to 4pm the pound had re-crossed the $1.30 threshold at $1.3023, up +0.71%, while the euro was down -0.39% against the pound at 0.9163.
- UK FTSE 100 7,372.92 -0.52%
- Dow 21,871.33 -0.52%
- S&P 500 2,469.86 -0.27%
- Nasdaq 6,421.09 -0.23%
- Nikkei 225 19,385.81 -0.63%
- DAX 12,175.44 +0.60%
- CAC 40 5,104.69 +0.01%
- Gold 1,340.50 +0.78%
- Oil WTI 48.70 +2.98%
Bank of England settles with Unite
Earlier today the Bank of England settled its long-running pay dispute with Unite workers, which lead to Threadneedle Street's first ever strike last month on a 1% pay offer. "As part of the deal Unite has,” the union said earlier, “also secured extra annual leave for bank staff, as well as a payment for lower paid staff in the 2017/18 pay review."
Following a ballot last month 60% of Unite members settled for a revised offer. The Bank of England said it was looking forward to a more “productive” relationship with Unite workers.
The more conciliatory tone could be taken up by other public sector government bodies. It’s thought some relaxation of public sector pay caps may be in the pipeline.
UK car sales endure 'diesel downer'
The lower British consumer mood transmits to UK car sales, down -6.4% on a like-for-like basis in August. Slowing car sales are usually considered a bellwether of underlying consumer confidence. The Society of Motor Manufacturers & Traders reported 74,433 new registrations in August, a substantial cut, while diesel car sales slumped a massive -21.3%.
No surprise, then, of the swelling number of scrappage incentives from the likes of Toyota, VW Group, Vauxhall and Renault. But while these schemes – some only run to the end of 2017– might give manufacturers a leg-up for the moment, the longer term view appears blacker.
Breaking news: Danish toy manufacturer Lego is slashing 1,400 jobs from its 18,200 workforce following a 5% fall in revenues in half-year trading. Germany and Japan have agreed that sanctions against North Korea should be increased.