U.K. August PMIs continued moderation points to economic easing

The August Services PMI headline of U.K. dipped by 1.8 points to 55.6, its lowest in over two years. Business expectations fell further to a six-month low, printing at 70.7, but remained above their long-term average. Accordingly, the Composite PMI was soft in August, as weak manufacturing and services weighed the overall index down. Manufacturing fell owing to disappointing export orders and lower employment. Meanwhile, the construction index was the only bright spot, rising (+0.1 point) to 57.3, contributing positively to the composite index, notes Barclays.

The downward surprise in today's PMI release points to continued moderation and underscores more cautious macro view that economic activity is to abate over the coming months, with GDP growth easing to around 0.5% q/q in Q3 and Q4. Despite a small rebound in August, the pace of service employment creation in the service sector remains the second weakest since March 2014. 

However, while employment and outstanding business in the service sector still remain comfortably above their longer-term average, business activity, new business and expectations have now fallen to just one standard deviation above their long-term average. That also holds for the composite index, where output is now just 0.7 standard deviations above its long-term average. Finally, regarding price pressures, businesses still enjoy weak input prices from commodities, but according to the Markit press release, wages remains the main source of higher average input costs, says Barclays.