James Smith, developed markets economist at ING, points out that the UK services PMI plunged to 50.4, which happens to be the lowest level since the immediate aftermath of the 2016 referendum.
Key Quotes
“This latest survey demonstrates fairly clearly that the elevated risk of a ‘no deal’ Brexit is beginning to have a tangible impact on growth.”
“According to Markit/CIPS, “delays with clients’ business investment decisions” was a key reason for the decline, and we expect this trend to persist over the winter. If the government’s Brexit deal is rejected by Parliament, then we’re unlikely to know for sure whether ‘no deal’ has been averted until much closer to the UK’s scheduled leave date in March (or later if article 50 has to be extended).”
“The bottom line is that fourth quarter growth is likely to be noticeably lower than in the third, and as we noted on Monday, we have our doubts that this will be heavily offset by pre-Brexit inventory building. While recent Bank of England commentary has made it clear that policymakers would like to resume tightening fairly soon given the stronger wage growth backdrop, we don’t expect a rate hike before May 2019 – with a clear risk that this could be pushed back later into 2019.”
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