fundamental alert

U.K. Services PMI Slumped to 12-Years Low, Calls for a Sharp Rate Cut

Wednesday, 05 November 2008 08:45:53 GMT  |  DailyFX Research

U.K. October services PMI slumped to a new record low of 42.4, the weakest since the series began in 1996, highlighting the dire state of U.K.'s large services sector. A breakdown of the reading similarly showed a new record low for the employment index, news business, outstanding business and business expectations. Meanwhile, prices charged were the lowest since February 2006, and input prices fell to their lowest since September 2007 on the back of softer commodity prices. Overall, data highlights the risk for a sever recession in the U.K and will fuel expectations of sharp BoE rate reductions near-term.
In addition, U.K. September manufacturing production fell 0.8% m/m (median -0.5%) after a 0.6% drop in August, with the y/y rate slipping to 2.3% from 2.0%, the weakest reading recorded since May 2003. Total industrial production fell 0.2% m/m (median -0.3%), following a 0.6% dip in August and with the annual rate being down 2.2%, compared to -2.3% in August. Oil and gas production jumped 9.3% m/m after production showed an unusual big drop earlier in the summer, and the ONS attributed the initial drop as well as the sharp rise to maintenance work, which was completed in September.
Meanwhile, British Pound (GBP) reversed gains, with Cable trading back to 1.5800 and EUR-GBP moving off 0.8085 to trade up to 0.8130. Sterling was already in decline ahead of the U.K. releases, but extended losses after U.K. October CIPS services PMI slumped to 42.4 and September manufacturing production fell 0.8% m/m, while industrial production was down 0.2%.

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