UK manufacturing and services PMIs drop into contraction zone amidst the Coronavirus crisis

The Bank of England’s former governor, Mervyn King, commented earlier this week that the Coronavirus threat is much more serious for the United Kingdom’s economy than the market crash in 2008. Tuesday’s economic data that gave an insight into the UK manufacturing and services sectors activity echoed the same as it suggested a greater blow to the UK’s economy in over two decades since record-keeping first began.

IHS Markit released its monthly report on the UK manufacturing and services purchasing managers’ index (PMI) in March on Tuesday. The data showed a significant contraction in both sectors amidst the ongoing health emergency that has disrupted businesses and is posing a massive threat to the global economy.

Markit’s Readings For UK Manufacturing And Services PMI

According to Markit, the flash UK composite output index that combines data from the manufacturing and services sector dropped to 37.1 in March from a significantly higher 53.0 in February and marked the worst in history. The flash UK manufacturing output index also declined into the contraction territory to record at 44.3 this month versus 52.2 that was printed last month. The manufacturing output index posted a 92-month low in March.

Markit’s data on Tuesday also highlighted that the business activity in the UK’s services sector took the greatest hit due to the pandemic in March and fell sharply to 35.7 this month. In February, the UK flash services PMI was registered in the expansion zone at 53.2. At 35.7, the reading was reported to be the worst since the start of record-keeping. Economists had forecast a much narrower contraction in the UK’s services sector to 45.0 in March.

UK’s manufacturing sector partially sustained strength but still dropped into the contraction zone in March. The flash manufacturing PMI recorded at 48.0 this month as compared to 51.7 that was recorded in February. The reading marked a 3-month low for the UK’s manufacturing sector. Economists had forecast a broader contraction in the manufacturing sector to 45.1 in March amidst the Coronavirus pandemic that has the UK under a countrywide lockdown.  

Response In The Forex Market

The forex market responded moderately to Tuesday’s economic data. GBP/USD climbed to 1.1725 following the release of the PMI report from around 1.1670.

Cable is currently challenging its near-term resistance. Breaking above the 1.1725 region will open way for the pair to 1.1790. On the downside, the pair has created strong support at 1.1570 level. Below this support, further decline to 1.15 level is expected.