According to the index if the number on the data falls below 50, then that reveals that the sector is contracting, which could contribute towards a another recession, just after the United Kingdom has recovered from the previous slump, the worst in a generation. This reading was consistent with a moderate increase in private sector activity overall. New orders and output both touched four-month highs in July.
Advertisement
New orders and higher production boosted manufacturing activity in July.
The overall reading moved into negative territory late previous year, due in large part to an increase in the value of the US dollar relative to other currencies, making export goods more expensive overseas.
The post-Brexit manufacturing PMI is lower than an earlier estimate of 49.1 and below 50, which would signify growth.
The slowdown across the eurozone as a whole likely reflects Britain’s June decision to leave the European Union, which created uncertainty about the strength of demand in the eurozone’s second-largest export market.
Chris Williamson, Markit’s chief economist, said: “The marked service sector downturn follows news from sister PMI surveys showing construction activity suffering its steepest decline since mid-2009 and manufacturing output contracting at the fastest rate since late 2012”.
While better than all forecasts in a Reuters poll of economists that pointed to a reading of 43.8, the PMI – collated entirely after the June 23 referendum – showed commercial construction dwindled and confidence flagged.
It said motor insurance prices surged by 9.5% year on year in its second quarter as it looked to offset the higher cost of claims, with more expensive repairs and guaranteed auto hire pushing up prices.
Markit’s report showed that the sector had a strong start to the third quarter. Anecdotal evidence cited greater inflows of new work and supportive economic conditions.
Prices paid for raw goods and materials for both construction and manufacturing increased at the sharpest pace since March 2015, which Mr Moore linked to sterling’s depreciation since the referendum.
Still, the rate of expansion was among the weakest registered over the past year and a half.
Advertisement
Earlier on Wednesday, Britain’s National Institute of Economic and Social Research said it expected the economy to shrink 0.2 percent between June and September and saw a 50 percent chance of recession by the end of next year.
