UK Breaking News: Service Sector Activity & Manufacturing PMI Plummet

UK PMI, GBP Analysis

• Flash UK PMI Composite Output Index at 47.2 vs. 49.1 in Sep - 21-month low.
• Flash UK Manufacturing PMI at 45.8 vs Sep 48.4 - 29-month low.
• Manufacturing output decline eased to 45.6 vs 44.2
• Flash UK Services PMI at 47.5 (Sep: 50.0). 21-month low

UK PMI Confirms Slowing Services and Manufacturing

The UK services sector has helped keep economic conditions somewhat afloat until the flash October print consigned it to a sub-50 reading, indicating a contractionary environment. The 47.5 print represents the fastest decline since January 2021 which doesn’t bode well for the UK economy which is anticipated by the Bank of England to confirm a recession at the end of Q4.

Chart Showing Services PMI Business Activity Index above ‘50’ Before Today

Source: Refinitiv

Manufacturers noted that supply chain shortages hampered production volumes with the added inhibitor of a general slowdown in demand.

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Sunak Emerges as Front-runner for PM Job, Overshadowing PMI Impact

In the UK, understandably, the PMI data is likely to have less of an effect as global markets eagerly await the outcome of the MP voting process at 2pm UK time. Last week the Chairman of the 1922 Committee, Sir Graham Brady announced that a new prime minister would be announced by Friday this week, but reports suggest that there may be a new prime minister as early as this afternoon if Rishi Sunak’s only rival, Penny Mordaunt, is unable to secure the 100 MP threshold to extend the process to Friday. Former prime minister, Boris Johnson removed himself from contention yesterday after having only secured 59 Tory MPs, well short of the 100 mark.

Immediate Market Reaction

Cable dipped slightly, towards the bottom of the daily range – which corresponds to last week’s closing price – where there has been a slight move higher after testing intra-day support. Cable gapped higher late on Sunday as the race for UK Pm became clearer after Boris Johnson dropped out. Be on the look out for the PM candidate results at 2pm UK time where political analysts see Rishi Sunak as the clear favorite.

5-Minute GBP/USD Chart

Source: TradingView, prepared by Richard Snow

--- Written by Richard Snow for DailyFX.com

Contact and follow Richard on Twitter: @RichardSnowFX