U.K. jobless rate rises to 4.8 pct in Q3 2020, labor market likely to deteriorate further in months ahead
U.K.’s flash PMI indices indicate decline in business activity in November, composite index falls to 47.4
The flash PMI indices for the U.K. released today indicated an overall decline in business activity in November, ending a run of four straight months of growth, and in line with the possibility of the U.K. economy contracting in the current quarter. The U.K. composite PMI index dropped to a six-month low of 47.4 in November from 52.1 in October, as the re-introduction of lockdown restrictions to halt the spread of the Covid-19 virus weighed on overall activity.
Nevertheless, with these measures greatly impacting those areas of the economy that rely on face-to-face interaction, the effect was more acutely seen throughout the services sector. Markedly, the PMI reading for the services sector fell to a six-month low of 45.8 from 51.4 previously, although the fall was less than expected.
However, on the contrary, the manufacturing PMI surprisingly rose to 55.2 from October’s 53.7, hinting at a more rapid pace of activity throughout the sector in November. This continued a recent theme of the U.K. experiencing a two-speed economy, with manufacturing benefiting from the global recovery, while services activity continues to be more susceptible to any renewed tightening in Covid restrictions.
Nevertheless, most of the boost to activity throughout manufacturing was reportedly led by firms “pre-purchasing due to Brexit uncertainty”, with both European customers seeking to take delivery of orders, and U.K. manufacturers stock building critical inputs, before the transition period ends on 31st December.
“On the basis that this effect proves temporary, the broader outlook for the UK economy will remain contingent on the direction the virus takes. While the survey reported a surge in firms’ optimism around their prospects for the year ahead – likely linked to the recent positive news around a vaccine – there was still some caution about the UK’s near-term growth prospects. Notably, this was reflected in firms continuing to reduce headcount and at a faster pace than that seen in October”, said Lloyds Bank.