UK: All sectors remain under pressure

3 min
Ana Boata
Ana Boata Senior Economist for Europe

Activity in the service sector remained subdued in October, reflected by the services PMI at 50 points (49.5 in September). Business levels were supported by existing contracts as the volume of new work declined further. The outlook improved slightly as a number of firms expected Brexit to be resolved early next year, reducing uncertainty, but the overall sentiment remained historically weak. Cost pressures continued to rise, due to wage growth but also higher prices for fuel, energy, food and imported items. Pricing power remained limited which suggests a further deterioration in company margins. In the construction sector, prospects were not better either with volumes of work falling for the sixth consecutive month across all three sub-sectors, with civil engineering being the worst performing. The index stood at 44.2 points, close to the 10-year low. Domestic political uncertainty weighs on demand in the sector. In the manufacturing sector, firms continued to report weaker new orders, notably from the domestic market. Growth in inventories of finished goods and purchases were at six-month highs. We expect GDP to fall by -0.1% q/q in Q4 2019 after an artificial rise of +0.4% in Q3.