UK services activity plunges in March – ING

James Smith, developed markets economist at ING, explains that the latest Markit/CIPS purchasing managers index (PMI) of UK has made it clear that the economy is being hit hard as it printed just 48.9 in March.

Key Quotes

“Of course, it’s important to remember that PMIs don’t always precisely reflect the extent of a slowdown, merely that an increasing number of firms are reporting worsening conditions. That said, this latest reading implies that the first quarter as a whole could see near-stagnant growth.”

“Well as things stand, our base case remains that Article 50 will need to be extended again – potentially for a long period. While this would give firms a temporary reprieve from the ‘no deal’ risk, we suspect companies will continue to make their preparations for this scenario.”

“All of this is costly, and we think under the scenario of a long extension, growth would continue to suffer. In this case, a Bank of England rate hike becomes increasingly unlikely this year.”