A reading above 50 indicates a month-to-month expansion, while a level below that points to a contraction.
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More evidence of post-Brexit economic malaise in the United Kingdom emerged on Wednesday with confirmation that a closely watched gauge of the services sector had declined at the fastest pace in more than seven years.
It seems nearly a foregone conclusion that this week will see the Bank of England slash its growth forecasts and take interest rates down to a record low of 0.25%.
The month of July saw the United Kingdom services sector contract for the first time in three and a half years, with experts citing the uncertainty around Brexit as a main driver.
The broad-based Nikkei Singapore Purchasing Managers’ Index (PMI) came in at 50.7 for July, lower than June’s 52.3.
Though the eurozone economy continues to grow, it’s not expanding at a substantive rate.
There was a further increase in raw material prices at only a slightly slower pace than the increase seen for June and factory-gate prices also increased for the month.
The slowdown is attributed to slowing new order growth and falling employment.
Markit said it was too early to know if the PMIs would stay as weak as they are now, but added that confidence about the year ahead was at its lowest ebb since February 2009 among firms in the services sector, the engine of the British economy. This number is not surprising given a lot of uncertainty surrounding the health of the United Kingdom economy in the wake of that country’s decision to leave the European Union.
Policymakers are widely expected to slash rates to a new historic low of 0.25% from 0.5%, while also potentially launching further economy-boosting measures to ward off the threat of recession.
“The weak numbers provide powerful arguments for swift policy action”, said Rob Dobson, an economist at Markit.
“Employment in manufacturing declined for the seventh month in succession and input-price inflation rose to a five-year high off the back of sterling’s weakness and higher commodity prices”.
So dire had the expectations for the survey been, the pound actually rose on the news, climbing 0.4 per cent against the dollar to $1.3229.
Markit said incoming new business volumes fell for the first time since the end of 2012.
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Travis Perkins was another heavy faller, off 4% or 57.5p to 1486.5p after revealing weaker demand as a result of the European Union referendum and warned over “significant uncertainty” following the Brexit vote.
