IHS Markit announces contraction in the UK’s economy for the third time in the previous four months

According to IHS Markit PMI reports, the business activity in the UK’s private sector continued to shrink in December. In collaboration with the Chartered Institute of Purchasing and Supply (CIPS), IHS announced the UK’s flash manufacturing and services PMI on Monday. Having missed the analysts’ estimates, the data suggested the UK economy to be struggling amidst the country’s imminent departure from the European Union on January 31^st, 2020.

UK’s Manufacturing PMI In December Marked The Lowest Level Since 2012

The manufacturing output in December’s report marked the fastest downturn. The flash manufacturing PMI for the United Kingdom was reported at 48.9 in November. In a previous estimate, analysts had expected the index to improve to 49.1 in December. Printing a significantly lower 47.4, the data brought bad news for the UK’s manufacturing sector.

On the other hand, data from the services sector didn’t support the UK’s economy either. The flash services PMI for the United Kingdom was recorded at 49.3 in November following which, analysts had anticipated it to improve to 49.6 in December. Against the expectations, however, IHS announced the services PMI to have considerably dropped to 49.0 in December.

Following the PMI reports, Sterling was seen losing strength against the Euro and the U.S dollar in the forex market. GBP/USD that touched the 1.3500 mark after the Conservative party’s victory in the UK’s general election, lost much of the gains and is currently trading around 1.3325 level.

UK’s Composite PMI Noted At 48.5 In December

The UK’s composite PMI, that provides insight into the private sector’s output, was capped at 48.5 in December, as per IHS Markit and CIPS economic data on Monday. The recording below 50 on all fronts, the economic data hinted at continuous contraction in the UK’s economy at large. Following the reports, analysts also highlighted that December marks the third time that the UK’s economy has contracted in the previous four months.

The reports further highlighted that the UK’s manufacturing PMI in December marks the worst for the index since 2012. Group director, Duncan Brock of the Chartered Institute of Procurement and Supply, cited the complications of the Brexit events to have contributed to keeping the manufacturing sector under pressure.

The decline in the services sector, as per the analysts, was even more worrying as this sector accounts for as much as around 80% of the United Kingdom’s GDP. Including services from waiting tables to business advisories, contraction to 49.0 versus the experts forecast of 49.6 in December, the data weighed the most on Sterling on Monday.