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According to James Smith, developed markets economist at ING, at 50.6, the latest UK services PMI suggests that the sector is barely growing.

Key Quotes

“IHS/Markit note that these PMI levels are usually consistent with a fall in output of -0.1% during the third quarter. Given the prospect of further volatility in the inventory numbers, this seems unlikely at this stage – we may see firms build stocks again ahead of the 31 October deadline, albeit at a slower pace than back in the first quarter (inventory levels are still reasonably high). This recorded as a positive for economic output, although of course is ultimately a temporary phenomenon.”

“However, there’s little doubt that the underlying pace of growth is likely to stay fairly lacklustre. Investment has been more-or-less consistently declining since the start of 2018, and this is a trend that is likely to persist. While the outcome of the coming 24-hours will be critical for the Brexit process, it seems unlikely at this stage that this week’s events will fully take the ‘no deal’ risk off the table.”

“The upshot is that underlying growth is likely to remain fairly lacklustre over coming months. That said, barring a ‘no deal’ exit in October, we think it’s still too early to be pencilling in UK rate cuts over coming months. Equally however, the prospect of further gradual tightening is becoming increasingly distant.”