UK economy loses momentum as fears mount about cost of Brexit, find latest surveys

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The weaker growth trend in services was most evident in consumer-facing sectors such as restaurants, cinemas, gyms and hairdressers

The UK economy is losing momentum as fears mount about Brexit, according to the latest round of industrial surveys.

The Purchasing Managers’ Index for services in August came in at 53.2, down from 53.8 in July.

Any figure above 50 signals expansion, but the latest data was weaker than the 53.5 expected by City of London analysts and represented the slowest pace of expansion since September 2016.

The composite UK PMI for August – which also includes the latest readings for manufacturing and construction – sank to 53.8, down from 53.9 in July, and its lowest since February.

Services accounts for 80 per cent of the UK economy.

Losing momentum

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“Although the latest two months’ data put the economy on course for another 0.3 per cent expansion in the third quarter, momentum is being gradually lost,” said Chris Williamson, chief economist at IHS Markit, which compiles the survey.

He said that the weaker growth trend in services was most evident in consumer-facing sectors such as restaurants, cinemas, gyms and hairdressers.

“The overall level of optimism also remained subdued, mainly linked to Brexit uncertainty, close to levels that have previously been indicative of the economy stalling or even contracting,” Mr Williamson added.

The manufacturing PMI for August was strong, rising to 56.9, the highest since April. But construction weakened to 51.1 in the month.

“Overall, the August purchasing managers’ surveys point to an economy still struggling markedly to get out of a low gear – as activity is hampered by squeezed consumers and major economic, political and Brexit uncertainties,” said Howard Archer, of the EY ITEM Club.

In another sign of a squeeze on consumers, data from the Society of Motor Manufacturers and Traders, also released on Tuesday, showed that car sales fell for a fifth month in a row in August – the longest run of decline in six years.

Sales fell at an annual rate of 6.4 per cent to 76,433 in the month.

[“Source-independent”]