UK services activity in July contracts at fastest rate since March 2009

UK final services PMI for the month of July remained unchanged from the flash reading of 47.4. This was consistent with consistent projections of 47.4. The final reading affirmed the largest ever one-month drop for the services PMI, bringing the headline balance to the lowest since March 2009, noted Lloyds Bank in a research report.

Looking at the July report’s details, the near-term outlook for the services sector is expected to face considerable headwinds. New orders and backlogs of work dropped significantly, whereas the forward looking business expectations dropped severely to 57.6, the lowest since March 2009.

The final estimate of the manufacturing PMI was revised downwardly in spite of the signs of domestic political stabilization and the rebound in global equity market confidence over the period. Given that the interim flash surveys included around 85 percent of the usual respondents, at face value, it might imply that manufacturing sentiment kept on easing through July.

“With the MPC meeting today and likely to announce easing measures tomorrow, it is the overall impression of survey weakness that is likely to shape the Committee’s thinking. In the absence of post-referendum ‘hard’ data, it will be a key consideration as it debates the scale of stimulus the economy needs in the aftermath of the referendum”, added Lloyds Bank.